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Oil

Abu Dhabi's Nov crude price differentials to rise 20-40 cents/b: survey

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Abu Dhabi's Nov crude price differentials to rise 20-40 cents/b: survey

Singapore — Price differentials for all four grades of crude originating from the UAE's Abu Dhabi are expected to climb by between 20 cents/b and 40 cents/b when producer ADNOC releases official selling prices for its November loading cargoes this week, a survey of market participants by S&P Global Platts revealed.

"I think ADNOC [OSPs] will be interesting," a trader said, adding that the "Upper Zakum [differential to Dubai] will be up 25 cents/b to 30 cents/b, no doubt."

Survey results revealed that most traders in Asia expect the OSP differential for Abu Dhabi National Oil Company's Upper Zakum grade to rise by that amount.

Expectations for ADNOC's other grades -- light sour Murban, Das Blend and Umm Lulu -- were also in a similar range of between 20 cents/b to 30 cents/b, with some traders expecting the price differential for Murban to jump a little higher.

"I feel with the [futures contract on the] exchange coming up, ADNOC will be leaning to the aggressive [for a price hike on Murban] side," the crude trader added.

Market interest in Murban has grown since ADNOC announced that it would launch a new futures contract for the grade in the first half of 2020, in a bid to cement Murban as a regional crude benchmark for the Middle East.

The grade, Abu Dhabi's largest by production, has an API of 40 and sulfur content of 0.79%, and is comparable with Arab Extra Light, which has an API of 39 and sulfur content of 1%, according to Platts Periodic Table of Oil.

OSP price differentials for Murban was in a wide range of between 5 cents/b and 50 cents/b during spot market trading in November.

Traders had previously cited higher liquidity in Murban as a differentiator between higher price differentials fetched for it in the spot market compared with the Das Blend and Umm Lulu grades.

Umm Lulu cargoes were reported to have traded at premiums of around 30 cents/b, while those for Das Blend traded in a range between 5 cents/b and 25 cents/b over their respective OSPs in November.

"The reason for this is Das and Umm Lulu are not fungible enough to create a liquid market," a second trader said.

"People won't buy and resell [Das and Umm Lulu], whereas with Murban someone will buy a cargo on Day 1 and resell on Day 5. That's the way it works," the second trader added, emphasizing that a robust trading interest in Murban will lead to a wider price range on the spot market.

OSP METHODOLOGY

ADNOC and Qatar's QP, who set the price of their crude retrospectively, take into account spot trading activity during the most recent trading cycle.

Price differentials for January-loading cargoes that traded through the month of November will be factored into the upcoming OSP issued by these producers as well.

ADNOC issues its OSPs at an outright value each month, but the market references the differential between the outright value and the average of Platts cash Dubai crude assessments to monitor the change in the OSPs on a month-on-month basis.

Benchmark cash Dubai averaged $61.97/b over November, up $2.60/b from the $59.37/b averaged in October, Platts data showed.

Platts surveys a range of crude oil market participants -- sellers, refiners and traders of Middle Eastern crude -- across Asia for OSP expectations each month.

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

-- Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com