Crude MOC: Sour complex falls as arbitrage weighs on sentiment

Benchmark cash Dubai crude's premium to Dubai futures fell in Singapore Aug. 10 while market sentiment eased amid increasing viability of arbitrage grades.

S&P Global Platts assessed October cash Dubai at a premium of $2.30/b to the same-month Dubai futures at the 4.30 pm Singapore local time close Aug. 10, down 18 cents/b from Aug. 9.

October cash Oman was assessed at a premium of $2.31/b to same-month Dubai futures at the close, down 21 cents/b.

Sentiment toward sour crude came was fraying, with arbitrage crudes from the US and West Africa becoming more viable for Asian end-users, increasing the possibility of demand being diverted away from the Middle East sour crude complex.

Medium sour arbitrage crude grades such as Mars are being offered at levels lower than Oman, suggesting there is room for downward adjustment for sour crude grades from the Middle East, according to a North Asia-based crude oil trader.

Traders also noted that spot differentials for West African crudes are easing due to insufficient demand from key buyer, China, which may make these crudes more economically attractive to other Asian buyers.

"[I] think market looks weak, margins are OK though. Some arbs are workable, [West African crude] diffs are also coming off," said a crude oil trader in Southeast Asia.

In the Platts Market on Close assessment process, China's Hengli offered a 500,000 barrel cargo of Abu Dhabi's Upper Zakum crude for loading in October. Hengli lowered the offer from Platts Dubai plus $2.45/b to Platts Dubai plus $2.35/b at the end of the MOC without attracting buying interest.

The MOC saw 10 October Dubai partials of 25,000 barrels traded, with BP, Glencore, Reliance and Koch on the sell side and Gunvor and Total on the buy side.

No convergence had been declared in August so far.

A convergence occurs when 20 partials are traded between two counterparties, resulting in a full, 500,000-barrel physical cargo being declared from the seller to the buyer.