In Oil & Companies News 27/07/2016
Recent shift and swings in global crude benchmark spreads present plenty of arbitrage opportunities for Asian end-users with some July-loading Alaskan crude cargoes heading to Asia while several million barrels of North European crude could also arrive in the coming months, market participants said Tuesday.
Arbitrage opportunities took center stage in the Asian sweet and sour crude market this week as the narrowing Brent-Dubai spread raised the potential of North Asian end-users picking up some North Sea crudes, while numerous trades were heard done between companies in the US and Asia.
The Brent/Dubai Exchange of Futures for Swaps, a key indicator of ICE Brent’s premium to benchmark cash Dubai, has been narrowing in recent months.
Regional traders said that the EFS had narrowed to the point where several North Asian refiners are finding Brent-linked North Sea crudes attractive. Sources said that GS Caltex had bought at least 1 million barrels of Forties crude for loading in August from an oil major.
A company source with close knowledge of the South Korean company’s monthly crude procurement declined to confirm the trade, however.
“We cannot comment regardless of whether the company has made the purchase or not. This is because the market impact of bringing in such big volumes of North Sea crude could be huge,” the company source said.
Meanwhile, traders said that Chinese buyers had also probably picked up a cargo or two of the light sweet North Sea crude for delivery in September or early October. Further details could not, however, be verified.
“The Brent-Dubai spread coming off and potential Forties arbitrage … these are things that ADNOC and even Saudi [Aramco] may have to consider before announcing their next OSPs,” said a Singapore-based crude trader.
The second-month Brent/Dubai EFS — which enables holders of ICE Brent futures to exchange their Brent futures position for a forward-month Dubai crude swap — fell to $2.72/b on July 15, its lowest level since hitting $2.71/b on February 24. The EFS was last assessed at $2.92/b on Monday. Elsewhere, the narrowing WTI-Dubai spread has probably hiked Asia’s appetite for US crude with sources saying that a couple of July-loading cargoes of Alaskan North Slope crude might be on its way to Asia.
Traders said China’s Unipec had bought the cargoes but the company declined to comment.
“Sinopec refineries are capable of processing ANS. They always buy [Alaskan North Slope crude] from an oil major,” said a North Asian crude trader.
WTI-DUBAI SPREAD FAVORS ASIAN, RUSSIAN CRUDE SALES TO US
Many traders expressed surprise at the recent sale of Alaskan North Slope crude to an Asian buyer.
“Looking at the recent WTI-Dubai spread, it’s actually easier for Middle Eastern, Asian and Russian crudes to sell to the US … I can’t think of any reason why [any Asian refiner] would buy [US crudes] because the arbitrage economics does not make much sense,” said the North Asian trader.
WTI has been commanding a steady premium to Dubai crude for several months and some of the suppliers of Far East Russian grades have been looking to grab US buyers’ attention.
“There are some medium sour [Middle Eastern] grades expected to be heading to the US West Coast and that’s also raising hopes for some Russian crude sellers to place their September cargoes to buyers there,” said another North Asian crude trader.
Some traders said that the WTI/Dubai swaps spread may have narrowed slightly in recent weeks, but the premium for WTI to Dubai remained high enough to make Dubai-linked Far East Russian grades competitive for US end-users. The front-month WTI-Dubai swaps spread averaged $1.53/b so far this month. WTI has not traded at a discount to Dubai swaps since February 22 this year.
In late May, India’s ONGC Videsh Ltd. was said to have sold via tender 700,000 barrels of Sokol crude for loading over July 20-26 to Vitol at a premium of around $5.10/b to the July average of first-line Dubai and Oman assessments on a CFR North Asia basis. Market sources said that the trading company could have resold light sweet Russian crude to US refiner Tesoro. Furthermore, a cargo of Russia’s ESPO crude has arrived on the US West Coast, marking a rare voyage across the Pacific Ocean for the Siberian crude.
Aframax vessel the Sea Bay left Kozmino, the load port for ESPO crude, on June 29 and arrived at Long Beach on the US West Coast on July 18, according to Platts ship tracking software cFlow.
The US West Coast has also been a sharp uptick in the flow of Oman export blend with around four VLCCs arriving since April this year.
“With potential arbitrage opportunity to the US open for September for Middle Eastern and Russian cargoes, Sokol and ESPO premiums could improve further,” the Singapore-based trader said, adding that some Al-Shaheen cargoes for loading in September could be heading to end-users on the US West Coast.
Earlier this month, Tasweeq was said to have awarded its tender for four cargoes of Al-Shaheen crudes for loading over September 1-2, 18-19, 24-25 and 27-28 to various Asian end-users as well as US refiner P66, at discounts ranging from 88 cents/b to around $1.20/b to Platts Dubai crude assessments.
Source: Recent shift and swings in global crude benchmark spreads present plenty of arbitrage opportunities for Asian end-users with some July-loading Alaskan crude cargoes heading to Asia while several million barrels of North European crude could also arrive in the coming months, market participants said Tuesday.
Arbitrage opportunities took center stage in the Asian sweet and sour crude market this week as the narrowing Brent-Dubai spread raised the potential of North Asian end-users picking up some North Sea crudes, while numerous trades were heard done between companies in the US and Asia.
The Brent/Dubai Exchange of Futures for Swaps, a key indicator of ICE Brent’s premium to benchmark cash Dubai, has been narrowing in recent months.
Regional traders said that the EFS had narrowed to the point where several North Asian refiners are finding Brent-linked North Sea crudes attractive. Sources said that GS Caltex had bought at least 1 million barrels of Forties crude for loading in August from an oil major.
A company source with close knowledge of the South Korean company’s monthly crude procurement declined to confirm the trade, however.
“We cannot comment regardless of whether the company has made the purchase or not. This is because the market impact of bringing in such big volumes of North Sea crude could be huge,” the company source said.
Meanwhile, traders said that Chinese buyers had also probably picked up a cargo or two of the light sweet North Sea crude for delivery in September or early October. Further details could not, however, be verified.
“The Brent-Dubai spread coming off and potential Forties arbitrage … these are things that ADNOC and even Saudi [Aramco] may have to consider before announcing their next OSPs,” said a Singapore-based crude trader.
The second-month Brent/Dubai EFS — which enables holders of ICE Brent futures to exchange their Brent futures position for a forward-month Dubai crude swap — fell to $2.72/b on July 15, its lowest level since hitting $2.71/b on February 24. The EFS was last assessed at $2.92/b on Monday. Elsewhere, the narrowing WTI-Dubai spread has probably hiked Asia’s appetite for US crude with sources saying that a couple of July-loading cargoes of Alaskan North Slope crude might be on its way to Asia.
Traders said China’s Unipec had bought the cargoes but the company declined to comment.
“Sinopec refineries are capable of processing ANS. They always buy [Alaskan North Slope crude] from an oil major,” said a North Asian crude trader.
WTI-DUBAI SPREAD FAVORS ASIAN, RUSSIAN CRUDE SALES TO US
Many traders expressed surprise at the recent sale of Alaskan North Slope crude to an Asian buyer.
“Looking at the recent WTI-Dubai spread, it’s actually easier for Middle Eastern, Asian and Russian crudes to sell to the US … I can’t think of any reason why [any Asian refiner] would buy [US crudes] because the arbitrage economics does not make much sense,” said the North Asian trader.
WTI has been commanding a steady premium to Dubai crude for several months and some of the suppliers of Far East Russian grades have been looking to grab US buyers’ attention.
“There are some medium sour [Middle Eastern] grades expected to be heading to the US West Coast and that’s also raising hopes for some Russian crude sellers to place their September cargoes to buyers there,” said another North Asian crude trader.
Some traders said that the WTI/Dubai swaps spread may have narrowed slightly in recent weeks, but the premium for WTI to Dubai remained high enough to make Dubai-linked Far East Russian grades competitive for US end-users. The front-month WTI-Dubai swaps spread averaged $1.53/b so far this month. WTI has not traded at a discount to Dubai swaps since February 22 this year.
In late May, India’s ONGC Videsh Ltd. was said to have sold via tender 700,000 barrels of Sokol crude for loading over July 20-26 to Vitol at a premium of around $5.10/b to the July average of first-line Dubai and Oman assessments on a CFR North Asia basis. Market sources said that the trading company could have resold light sweet Russian crude to US refiner Tesoro. Furthermore, a cargo of Russia’s ESPO crude has arrived on the US West Coast, marking a rare voyage across the Pacific Ocean for the Siberian crude.
Aframax vessel the Sea Bay left Kozmino, the load port for ESPO crude, on June 29 and arrived at Long Beach on the US West Coast on July 18, according to Platts ship tracking software cFlow.
The US West Coast has also been a sharp uptick in the flow of Oman export blend with around four VLCCs arriving since April this year.
“With potential arbitrage opportunity to the US open for September for Middle Eastern and Russian cargoes, Sokol and ESPO premiums could improve further,” the Singapore-based trader said, adding that some Al-Shaheen cargoes for loading in September could be heading to end-users on the US West Coast.
Earlier this month, Tasweeq was said to have awarded its tender for four cargoes of Al-Shaheen crudes for loading over September 1-2, 18-19, 24-25 and 27-28 to various Asian end-users as well as US refiner P66, at discounts ranging from 88 cents/b to around $1.20/b to Platts Dubai crude assessments.
