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Sour crude steadies as market awaits physical trading kickoff

Singapore — The sour crude complex continued to track sideways for a third consecutive morning in Asia, as market watchers awaited cues from the physical spot market for Middle East cargoes.

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At 11:00 am Singapore time (0300 GMT) on Thursday, the August Brent/Dubai EFS was notionally assessed at $2.98/b, little changed from $3.02/b assessed at the 0830GMT Asian trading close on Wednesday.

The EFS has hovered around this key $3/b mark for most of the week, tempting North Sea sellers of light, sweet crude oil to move Brent-linked barrels across to Asia.

An EFS spread above $3/b generally makes the North Sea arbitrage to Asia unworkable, traders say.

Meanwhile, traders of physical sour crude in Asia seemed wary of committing to an overly bullish narrative Thursday, with most seemingly convinced that the upwards rally in Dubai had run out of steam.

"The momentum has broken," one trader based in Singapore said this week.

Still, sour crude spreads have showed resilience to bearish sentiment, with the intermonth Dubai swaps structure largely steady early Thursday in Asia.

The August/September Dubai swap spread was notionally assessed at 44 cents/b at 11:00 am Singapore time (0300 GMT), up a cent from 4:30 pm (0830 GMT) Wednesday.

Meanwhile, the September/October Dubai swap remained steady at 34 cents/b between late Wednesday and early Thursday in Asia.

Traders largely expect the sideways trajectory to continue until further cues from the physical spot market. Trading activity in the spot market has been slow to pick up this month, they told Platts.

Lukewarm Chinese demand, and the US-China trade conflict have overshadowed the bullish impact of OPEC production cuts that were keeping a lid on medium and heavy sour crude supply for most of the year so far, traders said.

Meanwhile, the Platts Market on Close assessment process for sour crude in Asia has seen sizeable activity for August loading barrels, including partials of 25,000 barrels as well as full 500,000-barrel cargoes.

A total of four August loading crude cargoes changed hands in the Platts Asia crude oil Market on Close process Wednesday, with three of these declared via partials convergences for August Dubai crude.

This brings the total number of convergences in the Platts Asia crude MOC in June to eight, with all eight being for Upper Zakum crude, a medium heavy sour staple in the Asian market.

A total of 265 August Dubai partials have changed hands in the Platts crude MOC this month.

Wednesday's Market on Close process also saw the first ever Dubai crude partial traded by a Chinese independent refiner. China's Hengli OilChem Pte Ltd sold a 25,000 barrel clip of Dubai to Shell at a price of $59.85/b at 4:26 pm Singapore time (0826 GMT).

Additionally, the MOC saw two offers for Abu Dhabi's light sour Murban crude shown by sellers BP and Total. Total's offer for Murban -- for August 1-25 loading with B/L month pricing terms -- moved down to a premium of 5 cents/b over the Murban OSP, at which point it was bought by Shell at 4:29 pm Singapore time (0829 GMT).

Platts assessed Murban at an outright price of 60.95/b on Wednesday, and at a premium of 5 cents/b to its OSP.

Platts cash Dubai crude for August was assessed at $59.885/b.

--Eesha Muneeb, eesha.muneeb@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com