Middle East Crude: Steady as Traders Reassess Market
The Middle East crude market held steady on Wednesday as buyers and sellers stayed on the sidelines to reassess supply and demand.
The conflict in Iraq has not caused the market to rally so far, with cash differentials falling instead, held down by lacklustre demand in Asia and ample supply from Europe and Latin America.Abu Dhabi Murban and Das Blend have traded at premiums of 12-13 cents a barrel to OSP, down from earlier deals at 15-19 cents a barrel. These lower prices have drawn bargain hunters from India to the market although it was not immediately clear if they bought any cargoes.
The market may improve as Kenya was heard to have issued a tender seeking Murban crude although details remain scant. "Murban sellers are holding back, maybe they are preparing for Kenya tender," a trader said, adding that offers of Abu Dhabi grades have bounced back to premiums of 20 cents a barrel. August premium for competing Russian ESPO slipped. Rosneft was heard to have sold a cargo to load on Aug. 3-8 to an oil major at $4.30-$4.40 a barrel above Dubai quotes, traders said, down from $4.85 in a previous deal. The deal could not be independently verified.
Qatar Marine has sold out with its discount widening to more than 15 cents a barrel to its OSP after earlier deals at about 10 cents a barrel, traders said. Japanese refiner Fuji Oil has bought two cargoes of Qatar Land at 3 cents a barrel above its OSP. Asia is also due to receive more crude from Europe, Africa and Latin America as rising production and lower demand in those regions push excess supplies eastward. North Sea crude exports will resume from late June as Vitol and Trafigura have sold 4 million barrels of Forties to North Asian buyers so far, traders said.
Offers of Latin American grades, displaced by rising U.S. shale oil output, are also rolling into Asia. "We see a lot of offers from that region to cover July and August," a trader at a South Asian refiner said, adding that Colombian grades Castilla and Vasconia had been offered.
TENDERS
South Korea's KNOC has offered 1 million barrels of Basra Light crude in a tender in exchange for the same volume of condensate. The Basra Light cargo can be lifted in July-August while the condensate cargo can be delivered in October-November. The tender will close on June 18.
DME OMAN
DME Oman for August settled at $109.97 a barrel, up $1.26 at 0830 GMT. This puts DME Oman at $1.01 a barrel above Dubai swaps, against a premium of $0.99 a barrel in the previous session.
MARKET NEWS
India's government expects oil prices to rise as high as $120 per barrel for several months because of fighting in Iraq, potentially driving a hole of at least 200 billion rupees ($3.3 billion) in the budget, two government sources told Reuters.
Iraq will need to import about half its oil product needs, more than 300,000 barrels per day, after the country's largest refinery at Baiji closed due to recent violence, a senior Iraqi oil official said.
The Canadian government approved the construction of Enbridge Inc's Northern Gateway pipeline on Tuesday, setting the stage for a barrage of lawsuits and demonstrations by environmental and aboriginal groups opposed to the project.
