October Mideast Crude Trading at Discount

October-loading Middle East crude cargoes have kicked off trading at discounts to their respective price markers as demand in Asia remained soft, traders said on Monday.

Asia's appetite for spot crude stayed low for a second month as refiners have cut output on weak margins and are drawing down crude stocks bought in previous months instead of buying fresh supplies.

A narrowing in Brent's premium against Dubai also encouraged refiners to buy more oil priced on the global benchmark, reducing demand for Middle East crude, even though large volumes of a couple of grades have been snapped up during the Platts' market assessment process.

"Everyone is cutting their run rates as the margin is thin," a trader with a North Asian refiner said.

"There is no reason to buy more crude."

Complex refining margins in July hit the lowest since October 2014, forcing some Asian refiners to cut output.

Abu Dhabi's flagship Murban was traded at discounts of more than 30 cents a barrel to its official selling price (OSP) as Japanese trader Itochu Corp sold a cargo to refiner TonenGeneral, traders said.

Demand for the light sour crude also dropped as South Korean refiners resumed buying North Sea Forties after Brent's premium to Dubai <DUB-EFS-1M> fell to below $1 a barrel, they said.

A slump in freight rates has also made it cheaper for the European oil to head to Asia. Glencore (GLCNF) and Vitol have put tankers on this voyage on provisional charter, shipping fixtures showed.

This was wider than discounts fetched for September-loading cargoes traded last month.

Royal Dutch Shell (RYDAF) sold a Qatar Marine crude cargo to Japanese refiner Idemitsu Kosan (IDKOY) last week at 3 cents a barrel below its OSP, traders said, and expect the grade's discount to widen further this week.

Norway's Statoil (STO) has sold a cargo of Banoco Arab Medium for October loading via a tender at a double-digit discount to Formosa Petrochemical, traders said.

The grade was sold at similar discounts last month.

In contrast, premiums for Upper Zakum and Oman, grades that can be delivered during the Platts price assessment process, have hit multi-month highs on robust demand from Chinaoil.

Reporting by Florence Tan