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Analysis: Strengthening Middle East crude complex fails to lift light sour crudes

Singapore — A rising Middle East sour crude complex is failing to lift lighter sour grades along with it, with abundant arbitrage and overhang cargoes overshadowing structural sentiment, traders said this week.

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The spread between October cash and swap Dubai crude -- typically used by traders as an indicator of Middle East sour crude market sentiment -- rose to 49 cents/b Monday from 38 cents/b last Friday.

The rise reflected strength on the medium-heavy end of the sour crude complex, which turned bullish as October loading cargoes for heavier crudes were in short supply, crude sources said.

"Dubai [is] stronger, maybe [because] all the Upper Zakum, Al-Shaheen is gone," said a Singapore-based crude trader on Monday.

The strength failed to translate to lighter sour crudes, however. Market sources said abundant arbitrage cargoes, saddled with an overhang of September loading light sour crude cargoes, were putting pressure on prices for those grades.

Crude grades such as ADNOC's Murban or Das Blend, or Qatar's Land grade were trading in deep discounts to their respective OSPs, market sources said.

"September Murban is still being shown, as is [Russia's] ESPO," said a second trader, adding this was putting further pressure on October loading cargoes.

"[Das] is trading in the 70s cents/b [to its OSP]," said a third crude trader.

Oil major Totsa offered an October 1-25 loading cargo of Das Blend in the Platts Market on Close Assessment process on Monday. The offer was standing at a discount of 55 cents/b to its OSP as of 4:30 pm Singapore time, (0830 GMT) Monday. It saw no buying interest.

Totsa also offered up to 2 million barrels of Murban for delivery to Singapore over September-October during Monday's MOC process.

The offer, deliverable from September 15 to October 15, was offered at a premium of $3.35/b to October Dubai on a CFR Singapore basis as of 0830 GMT Monday. It also did not see any buying interest.

Meanwhile, BP's bid last Friday for an October loading cargo of Abu Dhabi's medium-heavy sour Upper Zakum crude did not return to the MOC process on Monday.

Platts assessed October loading Murban at a premium of $2.58/b to Dubai on a FOB basis Monday.

Murban's spread to its OSP in October was assessed at a discount of 55 cents/b, while that for Das Blend was assessed at a discount of 60 cents/b.

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

--Edited by Wendy Wells, wendy.wells@spglobal.com