30/10/2017 16:02 AST
A strong Middle Eastern sour crude structure and high cash differentials for cargoes traded this month could prompt Saudi Aramco and UAE's Abu Dhabi National Oil Company to raise the official selling prices of their respective crudes to multi-month highs, traders said.
Saudi Aramco is set to issue its December crude price differentials while ADNOC, which issues its monthly OSPs on a retroactive basis as a flat price, will issue its October OSPs in the coming days.
Traders said that they expected Saudi Aramco to raise the December OSP differentials of its crudes by between 30 cents/b and 90 cents/b from November.
"Saudi could raise [its OSPs] across the board ... [Middle Eastern sour crude structure] trended higher [at the] start of the month but now [it is] lower," a Singapore-based crude trader said.
The spread between front-month cash Dubai and same-month Dubai swaps averaged a premium of 46 cents/b in October so far, compared with a premium of 21 cents/b for the whole of September, Platts data showed.
The Dubai crude market structure is understood to be a key component in Saudi OSP calculations.
Strong demand, due to winter in North Asia and high oil product margins amid allocation cuts from key Middle Eastern producers and limited opportunities for arbitrage cargoes from the West, have kept the Middle East sour crude complex elevated for most of this month.
Sentiment was mixed on Aramco's December OSP differentials for its medium, heavy crudes.
Earlier this month, Saudi Aramco set the November OSP differential for Arab Extra Light at a premium of $1.80/b -- the highest since December 2016 -- and Arab Heavy at a discount of $1.80/b to the Platts Oman/Dubai average in November.
This puts the spread between the two grades at $3.60/b, up from $3.05/b in October, $2.55/b in September and $1.75/b in August, and the widest since April this year when the spread was at $3.55/b, Platts data showed.
"Saudi Aramco has been widening [the OSPs of its] light and medium grades for the last three months and this trend could continue," a Northeast Asian crude trader said.
"We have [also] seen good demand for light grades [while] fuel oil cracks [have] not [been] performing [well this month]," the trader added.
Second-month naphtha versus Dubai swap cracks averaged a premium of $1.11/b in October to date, compared with a premium of 63 cents/b for the whole of September, and the highest since November 2016 when it averaged a premium of $1.13/b, Platts data showed.
Meanwhile, second-month 180 CST and 380 CST high sulfur fuel oil to Dubai crude swap cracks averaged five-month lows of minus $2.33/b and minus $3.15/b in October to date, compared with minus $1.88/b and minus $2.74/b respectively in the whole of September, the data showed.
However, some traders said that they expected Saudi Aramco to raise the OSP differentials for its medium, heavy grades at a higher level than for the lighter grades.
"I feel Aramco may raise [the OSP differentials of Arab Medium and Arab Heavy] higher than usual," a North Asian crude trader Said.
Another trader said that he expected the December OSP differentials of Arab Medium and Arab Heavy to be raised by up to 90 cents/b due to "net back value from crack margin".
ADNOC OSP EXPECTATIONS
ADNOC was expected to raise the October OSP differentials for its crudes by between 20 cents/b and 50 cents/b, reflecting the traded levels for the respective grades this month, traders said.
Lighter grades, such as Murban and Das Blend, were expected to see higher increases compared with the medium sour Upper Zakum crude.
Click here for more
Platts
Please wait...
