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Middle East spot crude premiums surge on Asian demand, ChinaOil buying

Highlights

Spot premiums for June-loading Middle East crude oil surged this week as Asian demand was expected to recover after the end of the peak refinery maintenance season and ChinaOil's buying spree for June cargoes was causing a scramble for refiners to secure spot barrels, traders said Monday, April 13.

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Abu Dhabi's Murban began trading in the June-loading cycle at a premium of about 70 cents/barrel to the grade's official selling price, up from a premium in the 30s cents/b last month for May cargoes.

Itochu was heard to have sold a June Murban cargo to SK Energy at a 70 cents/b premium to the OSP, traders said.

Earlier, Japan's Mitsui was heard to have sold a similar June cargo of Murban to Cosmo Oil at a premium in the low 50s cents/b last week.


Traders said part of the strength in Murban premiums comes from the cut in the flow of North Sea Forties blend crude to Asia.

BP plans to shut the Hound Point terminal's VLCC jetty for maintenance from May 6 to June 8, a spokesman told Platts Wednesday.

Jetty number 1 is where VLCCs load on the North Sea to Northeast Asia route for Forties crude.

Its closures means Forties cargoes will have to find a home with local refiners during this period, given the higher costs of exporting crude on smaller vessel sizes than a VLCC.

Among medium-sour grades, SK Energy was heard to have bought a June cargo of Qatar Marine from Unipec at a premium of 50 cents/b to the grade's OSP.

The Qatar Marine premium was also up from a deal at about 35 cents/b earlier last week.

Traders said ChinaOil's buying of a number of June-loading medium-sour spot cargoes has increased competition among regional refiners to secure supplies, driving up spot premiums.

"Medium grade is very tight, it's a seller's market now," said a trader with a North Asian refiner.

So far this month, ChinaOil has bought 19 June-loading cargoes in the Platts Dubai Market on Close assessment process.

These include 13 cargoes of Oman crude and six of Abu Dhabi's Upper Zakum.

Under the crude partials trading mechanism, two companies must trade a physical cargo when a total of 20 Dubai partials have been exchanged during the same month in the MOC process.

The seller has the option to declare delivery of Dubai, Oman or Upper Zakum crude upon convergence of the 20 partials.

The buyer must accept the cargo nominated to it.

--Gurdeep Singh, gurdeep.singh@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com