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Qatari condensate differentials plummet on impending return of Iran's South Pars

Singapore — Traded differentials for Qatar's deodorized field condensate plummeted to near 4-year lows on Thursday, amid dwindling interest from the grade's main buyers due to the impending return of Iranian South Pars condensate and a persistently weak light distillates complex.

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Qatar Petroleum for the Sale of Petroleum Products sold one to two cargoes for January loading to a South Korean end-user at a discount of around 25 cents/b to Platts Dubai crude assessments on an FOB basis, sources said.

In contrast, November-loading cargoes of DFC were sold at a premium of around $3.75/b to Platts Dubai crude assessments on an FOB basis.

No DFC cargoes were sold in QPSPP's tender for December-loading cargoes.

DFC has not been assessed at a discount to Platts Dubai since January 2015, S&P Global Platts data showed.

South Korea's Hanwha Total Petrochemical, Hyundai Oilbank and SK Energy are typically the main buyers of Qatari condensates, but sources said that interest from the companies have fallen this month as the country prepared to resume imports of Iran's South Pars condensate.

Two of the companies did not participate in the tender and neither did a few Western trading houses that usually did, sources said.

South Pars is the preferred condensate feedstock for the three South Korean refiners, accounting for as much as 70-80% of the baseload feedstock for their condensate splitters before the US announced sanctions against Iran.

Sources said South Pars condensate could return to South Korea as soon as February, with refiners now in negotiations with the National Iranian Oil Co. for January-loading barrels.

South Korea was one of the eight countries that received waivers from the US on November 5 for Iranian oil purchases.

"We should see January-loading barrels [of South Pars] starting to head back to Korea, which means it directly displaces what would be Qatari barrels," a sweet crude trader said.

Condensate prices in Asia have also been dogged by a persistently weak light distillates complex due to an oversupply of naphtha cargoes from the West and poor gasoline margins.

The M2 Northwest Europe naphtha crack spread against Brent crude, watched by condensate traders as a gauge of market sentiment, touched a 4-year low of minus $11.25/b on November 8. It was last assessed lower on November 11, 2014, at minus $11.80/b.

As of November 14, the crack spread has recovered slightly to minus $9.55/b.

Most recently, a January-loading cargo of Australia's North West Shelf condensate, Asia's most liquid condensate grade, was bought by Indonesia's Pertamina at a discount of around $3/b to Platts Dated Brent crude assessments on an FOB basis.

NWS condensate was last assessed this low by Platts on February 5, 2015, when it was at a discount of $3.20/b to Platts Dated Brent crude assessments.

--Andrew Toh, andrew.toh@spglobal.com

--Wanda Wang, wanda.wang@spglobal.com

--Edited by E Shailaja Nair, shailaja.nair@spglobal.com