Analysis: ADNOC, Qatar Petroleum official selling prices cut in line with crude oil market expectations

Analysis: ADNOC, Qatar Petroleum official selling prices cut in line with crude oil market expectations

Analysis: ADNOC, Qatar Petroleum official selling prices cut in line with crude oil market expectations

Middle East crude oil official selling prices largely fell within expectations this month, crude traders and end-users in Asia told S&P Global Platts Friday.

OSPs from UAE’s Abu Dhabi National Oil Company and Qatar Petroleum were keenly awaited, as market participants had viewed the previous month’s OSPs as out of line with bearish trading sentiment for the October trading cycle.

“ADNOC [OSP] cuts are very fair, especially on Upper Zakum — Murban looks in line now,” said a North Asian trader for this month’s changes.

Earlier this week, ADNOC issued OSPs of its three sour crude grades loading in August, cutting prices of all three from July levels.

The OSPs for Murban, Das Blend and Upper Zakum crude grades are priced retroactively, with this month seeing prices for August loading cargoes being declared by the producer.

ADNOC decreased Murban to $75.05/b in August from $76.30/b in July, a cut of $1.25/b on the flat price. Crude oil traders however, tend to evaluate the ADNOC and QP OSPs on their differentials to Dubai cash assessments.

The August Murban OSP is equivalent to a premium of $2.56/b to August front-month cash Dubai, which averaged $72.49/b for the month, Platts data showed.

Last month, the same differential amounted to $3.18/b, meaning the August Murban differential to Dubai was cut 62 cents/b by ADNOC.

ADNOC and QP are believed to consider, among other things, the spot trading price differentials of their crude grades each month in their OSP methodologies.

Murban crude traded at discounts of 50 cents/b to 60 cents/b to its OSP in the spot market for October loading barrels last month.

Das Blend and Upper Zakum saw similar cuts by ADNOC, which crude traders said were in line with where the cargoes had traded previously.

Similarly, QP’s OSP cuts for the month fell within expectations as well as spot traded differentials, said traders and end-users surveyed by Platts.

QP cut the OSPs of its Qatar Land and Marine grades by 62 cents/b and 2 cents/b, respectively, when viewed as differentials to front month cash Dubai assessments in August.

Qatar Land was priced at $74/b for August, a spread of $1.51/b over the October cash Dubai average in the same month. This is 62 cents/b lower than the July spread.

Cargoes of Qatar Land traded in discounts ranging from 60 cents/b to 70 cents/b last month, according to market sources.

QP cut the Marine OSP to $72.90/b, putting it at a premium of 41 cents/b against October cash Dubai in August, and down 2 cents/b compared to July.

PERSIAN GULF MARKET ON ITS WAY UP

Barely a month after trading in substantial discounts, the Persian Gulf sour crude club may trade in just as significant premiums, crude traders this week said.

A combination of widening Brent/Dubai EFS and dearth of Iranian medium heavy sour crude barrels from the market is proving to be bullish very quickly for Dubai and Oman based crudes, they added.

Given cheap OSPs and high base benchmark levels, Middle East crude could see spot differentials rising several notches to make up for the difference, said traders.

Trading ideas for Murban, Upper Zakum, Qatar Marine and Al-Shaheen crudes were all in premiums to their respective pricing bases, according to survey participants.

“Qatar Marine [looks very valuable] right now given Oman and Dubai spreads,” said a Singapore-based crude trader.

November loading cargoes of Qatar Marine were heard to be offered in the Asian spot market at premiums of 30 cents/b to its OSP, according to sources. Comparatively, cargoes of QM traded in a small range around the OSP last month.

“Considering the [August QM] OSP at 41 cents/b [premium vs Dubai] and Dubai at $1.20/b, QM looks like a bargain even at 30 cents/b [premium],” the trader explained.

The Dubai November cash to swap structure rose to an average of $1.31/b within the first four trading days in September, compared to a whole month average of 47 cents/b in August, Platts data showed.

Manjula

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