Sour crude spreads move higher as market sentiment firms

Singapore — Timespreads for benchmark Dubai crude oil futures rose Tuesday morning in Asia as market sentiment firmed for Middle East sour crude, amid strong demand from North Asian refiners.

At 10 am in Singapore (0200 GMT), the September/October spread for Dubai futures was notionally assessed at $1.08/b. The spread moved past the $1/b mark Monday evening at $1.04/b as of 4:30 pm in Singapore (0830 GMT).

The October/November Dubai futures spread was also higher Tuesday morning, to be notionally assessed at 86 cents/b, compared with 83 cents/b on Monday evening.

The October Brent/Dubai Exchange Futures for Swaps spread however, remained largely unchanged, at $2.72/b on Tuesday morning. It was assessed at $2.71/b on Monday's close of trading in Asia.

Spot cargoes trading for Middle East sour crude were clearing quickly for September loading and October loading due to firm buying sentiment from refiners in China, Japan and other refiners in East and North Asia, market participants told S&P Global Platts.

"Europe [market] is strong [and] US arbs [are] closed [due to US-China trade concerns]," said one Singapore-based crude trader, underlining those factors led to buying inquiries from China for Persian Gulf crude to remain active this month.

Despite this, a US crude cargo delivered into Asia was offered for the first time in the Asian Platts Market on Close assessment process Monday, a month after a similar cargo traded for the first time on a delivered Rotterdam basis in the European MOC process.

Oil major Shell offered 1 million barrels of WTI Midland crude on the Mt Phoenix Jamnagar for October 15-25 delivery at Singapore/Linggi/Nipah on a DES basis in the Asia MOC process.

The offer stood at a premium of $4.55/b to first-line October Dubai at the end of the MOC process, with no buying interest seen.

Beyond China, Asia Pacific remains a key destination for US crude exports with almost half the country's total crude exports from January to May destined for the region, according to data from the US Energy Information Administration.

"The US crude market is growing and [Asian] refineries [have better] understanding of this crude and are using it more," a Singapore-based crude trader said.

WTI Midland crude first traded MOC process in Europe on July 2, with BP buying Occidental's offer of 700,000 barrels of WTI Midland, basis DAP Rotterdam loading, from the MODA terminal with expected delivery August 27-31 at Platts Dated Brent plus 60 cents/b.

Since then, several cargoes of WTI Midland have traded in the MOC process in Europe.

Monday's MOC in Asia also saw its third full cargo of Abu Dhabi's light sour Murban crude traded for the month.

Total placed an offer for an October-loading Murban cargo on a floating basis versus its official selling price. The cargo was picked up by Petrochina in the 30-minute process at a premium of 20 cents/b to its OSP.

Previously, PetroChina purchased two Murban cargoes of similar terms from BP during the Platts crude MOC on August 14. The cargoes were purchased at premiums of 5 cents/b and 8 cents/b each.

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

--Ada Taib, ada.taib@spglobal.com

--Edited by Nurul Darni, nurul.indriani.darni@spglobal.com