Middle Eastern crude producers expected to roll over/raise Nov OSPs: sources

Singapore — Middle Eastern crude producers are expected to roll over or raise their November official selling price differentials by 10-20 cents/b, trade sources told S&P Global Platts.

This comes as the benchmark Dubai crude structure recovered slightly on the month in September, sources said.

The front-month cash Dubai spread to same-month Dubai futures, or Dubai M1-M3 spread, averaged at a discount of 53 cents/b in September to date, slightly higher from an average discount of 63 cents/b seen in August, Platts data showed.

The spread is a key sour crude market indicator, tracked by Middle Eastern producers to define the core direction and extent of price hikes or cuts.

"OSPs can go up by 10 cents/b, but with this really low margin, Saudi should roll over their OSP for the East. Otherwise their oil will be unpopular again," a source from a Western trading house said.

Margins for most refined products showed little signs of improvement on the month. Lackluster margins have largely capped excessive demand for crude this year.

"Generally the market is not short of supply. Fundamentals wise, I think it's hard to be convinced that the OSP should be raised. Crude demand is not so supported as products stock are not low," a source from a Chinese oil major said.

Chinese market inventory levels have recently hit a fresh high as barrels were transported from floating storage into inland storage, Platts had reported.

Mixed Views Around Light Crude OSP

Some trade sources said that the OSPs for light crude grades could be more supported compared to the medium-heavy grades.

This was due to improving light distillate cracks in the gasoline and naphtha, while middle distillate cracks continued to perform poorly on the month.

The second-month 92 RON gasoline swap crack versus Dubai averaged $3.59/b in September so far, higher from $2.72/b in August, while the second-month naphtha crack averaged at plus 21 cents/b in September, recovering from minus $1.84/b in August, Platts data showed.

However, other crude oil sources said that the factor of ample supply could still hamper support in prices.

"Light-end cracks are up but Libyan barrels are coming back into the market as well," a source from a Chinese trading house said.

The market was eyeing risks of higher supply, after Libya's crude oil production has more than doubled in the week ended Sept. 26, Platts had reported.

The OPEC member was pumping just over 250,000 b/d as oil fields in the east have resumed production, with some crude already flowing out of three key eastern terminals, sources said Sept. 29.

Two million barrels of crude have already been exported from Marsa el-Hariga, while one million barrels will load out of Zueitina later in the week of Sept. 27, according to shipping and trading sources.