CRUDE MOC: Middle East cash spreads tick up after producers hike OSPs

Singapore — Middle East sour crude spreads for cash Dubai and Oman against July Dubai paper rose Monday, following a slew of price hikes from producers such as Saudi Aramco, Kuwait Petroleum and Abu Dhabi National Oil Company, pointing to a turnaround in market sentiment after a quarter of decimated oil demand in Asia.

Kuwait Petroleum on Monday raised prices for all its crude grades loading in June and heading to Asia, following in the footsteps of ADNOC on Sunday and Aramco earlier.

ADNOC hiked price differentials for its four crudes by $2.50/b to $2.90/b for June cargoes, and on Thursday, Saudi Aramco raised its Asian set of OSPs between 90 cents/b and $1.70/b from May levels.

The collective price hikes suggest other producers yet to issue their OSPs will likely follow suit, ending a spell of attractive OSP cuts and affordable crude barrels for Asian buyers, said traders in the Middle East market.

With COVID-19 related economic constraints easing somewhat across Asia, demand might start to pick up by the time July rolls around, they added. The Middle East crude market is currently trading physical cargoes that will load over the months of June and July.

Several spot market trades of Iraqi Basrah Light crude were reported in the market on Monday, with June-loading cargoes of the grade fetching premiums between $2/b and $3/b from buyers in Asia and in Europe.

The Basrah trades were "pre-program" cargoes, said traders, meaning they were likely sold by equity holders ahead of the release of the June program for the crude.

Demand for medium and heavy sour crudes similar to Basrah may remain above a minimum threshold despite lower refinery run rates across Asia, said traders. This was in large part due to a relatively smaller pool of medium and heavy crude globally, they said.

Meanwhile, light crude grades such as Arab Extra Light or Murban have slid into even deeper discounts against typically lower-priced medium crudes this month.

ADNOC's Murban OSP differential for June pinned the grade at a 50 cents/b discount to Upper Zakum. This is only the second month, historically, that Murban has traded at a discount to Upper Zakum.