Middle East Crude Softer as DME Premium Falls

The Middle East crude market softened on Monday, with DME Oman's premium to Dubai swaps falling for an eighth session in a row.

Trade in September-loading barrels will begin this week, with traders expecting lower demand compared with the previous month. Brent's narrowing premium to Dubai crude also made Dubai-linked grades less attractive, with some Asian refiners looking to buy arbitrage North Sea arbitrage cargoes. Low profit from processing crude into refined products and some refiners in Japan and South Korea undergoing maintenance during September and October are expected to weigh on the market, they said.

Refining margins in the Singapore refining hub have averaged just below $5 per barrel since early June, compared with around $6 in May and $6.50 in April. Qatar's Tasweeq closed a tender to sell eight cargoes of al-Shaheen for September-loading. Traders expected differentials for the grade to be weaker than last month, but the details were only expected Tuesday.
 

Differentials for Banoco Arab Medium may have fallen to a slight discount in a tender by BAPCO, a trader said. The company last month sold the grade at a premium of 7 cents a barrel above OSP. Premiums also fell for Russia's Sokol grade, after ONGC sold 700,000 barrels loading Sept. 14-17 to Vitol at around $7 per barrel above Oman/Dubai, traders said.

SODECO, a Japanese consortium holding a 30% stake in the Sakhalin-1 project, also sold one or two Sokol cargoes for September-loading around the same level, the traders said. In comparison, the light sweet grade last month traded at a premium of just above $8 a barrel. The deals could not be independently verified.
        
OSP
Kuwait set the official selling price (OSP) for its crude oil sales to Asian buyers for August 40 cents a barrel below the average of Oman/Dubai quotes, down 30 cents from July, traders
said on Friday.
    
REFINERY
South Korea's SK Energy has restarted two plants - one gasoline-making unit after its scheduled maintenance and a desulfurising unit shut following a small fire, a spokeswoman from parent SK Innovation said on Monday. Nansei Sekiyu KK, a Japanese refiner wholly owned by Brazil's Petrobras, said on Monday its 100,000-barrel-per-day crude distillation unit (CDU) at Nishihara refinery in Okinawa, southwest of Japan, remains shut as the original schedule for restart on the weekend is delayed a little bit.

    
DME OMAN
DME Oman for September settled at $104.69, down $1.22, at 0830 GMT. This puts DME Oman at $0.28 a barrel above Dubai swaps, down from a premium of $0.68 in the previous session.
               
MARKET NEWS
Protesters have shut down the eastern Libyan oil port of Brega, state firm National Oil Corp (NOC) said on Saturday, days after the government celebrated the reopening of major ports following almost a year of blockage. Libya's oil output has risen to 470,000 barrels a day, a spokesman for NOC said on Sunday, as the El Sharara oilfield ramps up production after a protest there ended. Kurdish forces seized two oilfields in northern Iraq and took over operations from a state-run oil company on Friday, while Kurdish politicians formally suspended their participation in Prime Minister Nuri al-Maliki's government.

China and the United States have signed a preliminary agreement to cooperate on strategic petroleum reserves (SPR), China's National Energy Administration (NEA) said, marking the first such effort between the world's top two oil consumers.                
 
Reporting By Jacob Gronholt-Pedersen