Differentials for Kazakhstan's naphtha-rich CPC Blend crude have climbed to their highest since late May as a tighter loading schedule for October and stronger demand for naphtha-rich crudes has added support to the market.
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CPC Aframax cargoes, basis CIF Augusta, were assessed at a $0.25/barrel discount to the Mediterranean Dated Strip on Tuesday, their highest level relative to the the 13-28 day Dated Brent average since May 27, Platts data shows.
Traders said that the recent bounce in differentials is tied in part to the unexpectedly quick sale of the October loading program for Algeria's naphtha-rich Saharan crude.
Saharan, which trades further forward than other regional sweet crudes, cleared unexpectedly quickly in October and at substantially higher differentials after arbitrage buyers came in and cleared several million barrels, leaving less available to the European spot market.
"One or two [arbitrage cargoes] is enough to tighten the program," a crude trader said. "Two to 4 million barrels out of a 14-15 million barrel program is a lot out of the region."
Also on Tuesday, Saharan Blend cargoes, FOB basis Algeria, were assessed at Dated Brent plus $0.15/b against the Mediterranean Dated Strip, their highest since since June 18.
Market sources said that October-loading cargoes have been heard to trade as high as plus $0.30/b to Dated Brent.
Trading sources said that the quick sale of Saharan in October has prompted many end-users to look towards CPC Blend, the other regional, non-Libyan naphtha-rich crude.
"There is less Saharan Blend around the place," another crude trader said of the recent bounce in CPC Blend differentials. "With Libya, you can't always count on those cargoes, so with margins good enough, any end-user looking to secure runs would want to buy a secure flow and if you can get Libyan oil on top of that, you can store it."
The provisional October CPC Blend loading program -- the schedule is typically released in two stages -- showed a sharp drop in scheduled exports on the final September program.
Average daily loadings of CPC Blend are currently set to plunge by 182,648 b/d from the final September program to 719,500 b/d in the provisional October schedule
Traders said that while the program is expected to have a number of injection cargoes before it is finalized early next month, it is still tighter than September, adding to the bullish tone in the market.