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North Sea crude Forties tumbles on lack of demand, closed arbitrage

North Sea crude Forties has come under growing pressure from a lack of outlets, with traders reporting a closed arbitrage to Asia from the North Sea as well as tepid local demand Tuesday.

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Forties dropped to a 14 cents/b premium to Forward Dated Brent Monday from a 44.5 cents/b premium Friday as buying interest moved away from the Platts Market on Close assessment process while competitive offering perked up.

Gunvor offered Forties loading November 26-28 at Dated Brent minus 20 cents/b with no buyer in sight Monday, while Glencore showed offers for November 28-30 and November 30 to December 2 loading at Dated Brent plus 15 cents/b and Dated Brent plus 40 cents/b, respectively, which also remained unsold.

On the buying side, Suncor posted a bid for Forties loading December 6-15 at Dated Brent minus 10 cents/b but that was withdrawn prior to the close.



Forties had peaked at a 60 cents/b premium on November 7, when Stasco, Suncor, Totsa and Unipec demonstrated strong buying interest for the grade.

Trading sources largely attributed the drop in differentials to poor arbitrage economics constraining the flow of North Sea oil out of the region, prompting sellers to discount barrels to attract interest.

"The arb is closed and the local demand is zero. We are just having a week when things are trying to find clearing value," a trader said, adding he was "not aware of any local refiners buying Forties".

"I think margins have had a decent knock in the last week, but it is mostly about the lack of arb east," another trader said. "A number of the November arb VLCCs of Forties are unsold and the arb sounds like it does not work so it seems to be coming home to roost a bit."

Another trader pointed to a downward move across the wider light crude complex. "Murban has corrected [downward] as well, so has Azeri. Even Ekofisk and Oseberg are correcting," the trader said.

Additionally, the underlying Brent CFD structure reflected a softer BFOE complex as it shifted to a contango Monday.

November 20-24 to December 18-22 was trading in an 18 cents/b contango in the brokered market Tuesday morning, compared with an 8 cents/b backwardation Monday morning.

--Maude Desmarescaux, maude.desmarescaux@spgloal.com
--Edited by Dan Lalor, daniel.lalor@spglobal.com