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Dubai-LOOP Sour spread shows open arbitrage east: In the LOOP

The Platts Dubai-LOOP Sour spread has widened to a little more than $3/b so far in February, suggesting an improved and opened arbitrage for US Gulf Coast medium sours grades to head to Asia.

The 10-day moving average spread between second-month Platts Dubai and front-month Platts LOOP Sour was $3.17/b Monday, with LOOP Sour the lower-valued of the two crudes. That compares with a January average spread of about $2.06/b and a Q4 2017 spread of $1.57/b.

As Dubai's premium over WTI increases, WTI-based medium sour grades become more competitive in export markets with comparable Dubai-based Middle Eastern grades. The spread is thus indicative of the market for USGC medium sour grades in Asia.

Refinery maintenance season in the USGC has pushed down regional demand for LOOP Sour and other domestic medium sour grades. Regional sour benchmark Mars has fallen 60 cents/b since the start of February to be assessed at WTI cash minus $1.65/b on Monday.

Tanker rates for ships sailing from the USGC have moved lower during the past month, adding further competitive advantage to domestic sour grades heading east. S&P Global Platts assessed VLCC tankers sailing a Caribbean-Singapore run at lump sum $3.6 million Monday. The US Gulf Coast-Singapore run is valued at a $200,000 discount to the Caribbean-Singapore rate, several shipping sources confirmed.

Even as USGC sour crudes become more economic to sell into Asian markets, several Middle Eastern crude OSPs have been cut in a bid to maintain market share. For March-loading barrels bound for Asia, Iraq's SOMO cut the OSP for Basrah light by 35 cents/b and the OSP for Basrah Heavy by 45 cents/b.

Iran's NIOC cut several March OSPs for Asia-bound volumes, including that of Iranian Heavy by 25 cents/b, Forozan by 20 cents/b and Soroosh by 30 cents/b.

Kuwait's KPC cut the price of Asia-Bound Kuwait Export Crude loading March by 25 cents/b. Saudi Aramco lowered the March OSPs for several of its grades headed to Asia, including that of Arab Heavy by 30 cents/b and Arab Medium by 25 cents/b.

The 'In the LOOP' Americas crude oil wrap runs each Monday in Crude Oil Marketwire, North American Crude and Products Scan and on the Platts Global Alert. You can read the FAQ: USGC LOOP Sour crude here and find the full special report LOOP Sour Crude: A benchmark for the future here. Also be sure to download our LOOP app by searching for 'Platts LOOP' in your app store.