Middle East Crude: Supported by Iraq Crisis
The Middle East crude market drew support from the worsening crisis in Iraq as Sunni Islamist militants gained more ground, while U.S. President Barack Obama considered military strikes to halt their advance towards Baghdad.
Militants from the Islamic State of Iraq and the Levant (ISIL) overran the northern city of Mosul earlier this week and have since pressed south towards Baghdad in an onslaught against the Shi'ite-led government. The Kurds, who run their own autonomous region in the north, have taken advantage of the chaos to expand their territory, taking control of the oil-rich city of Kirkuk and other areas outside the formal boundary of their enclave.
The uncertainty is expected to put a floor on prices for August-loading barrels, which were expected to start trading at discounted levels because of higher official selling prices (OSPs) announced by exporters. Top exporters, including Saudi Arabia, have raised their latest OSPs amid expectations of healthy demand as refiners bring units back online after maintenance and ramp up runs to meet peak summer demand. August-loading trade is expected to start any day now. No spot deals were heard done on Friday.
OSP
Iran has set the official selling price (OSP) of its Iranian Light grade for Asian buyers at $2.50 above the Oman/Dubai average for July, up 59 cents from the previous month, an industry source with direct knowledge of the matter said on Friday.
TENDER
Russia's Sakhalin offered a cargo of Vityaz crude for loading between Aug. 17-24 via a tender, which closes on June 18 with offers remaining valid till June 19.
DME OMAN
DME Oman for August settled at $109.66 a barrel, up $2.65 at 0830 GMT. This puts DME Oman at $1.44 a barrel above Dubai swaps, up from a premium of $1.14 in the previous session.
MARKET NEWS
China's implied oil demand fell 3.1 percent in May from the previous month to its lowest since August as refineries scaled back production for maintenance and continued to export surplus
fuel to trim inventories as the nation's economy slowed.
Refinery crude throughput in the country rose 3.5 percent from a year earlier to 40.33 million tonnes, or 9.5 million barrels per day (bpd), data from the National Bureau of Statistics showed. But daily crude runs were down from 9.63 million bpd in April as refineries scaled back output amid peak maintenance. Chinese state-run oil trader Zhuhai Zhenrong Corp has entered a one-year supply agreement to buy Iranian South Pars condensate, in its first term contract for the light crude oil with the Middle East supplier, according to industry officials.
Shi'te Muslim Iran is so alarmed by Sunni insurgent gains in Iraq that it may be willing to cooperate with Washington in helping Baghdad fight back, a senior Iranian official told Reuters. OPEC will have to produce a million barrels per day (bpd) more oil on average in the second half of 2014 to balance the global market, which will see a steep seasonal spike in demand, the West's energy agency said on Friday.
