//Asian refiners seek alternative crudes as Middle East sour crudes prices rally – Oil

Asian refiners seek alternative crudes as Middle East sour crudes prices rally – Oil

Rising prices for staple crude oil from the Middle East have caused Asian refiners to seek alternatives crudes from other regions.The spread between front-line cash Dubai versus same-month Dubai swap was assessed at a premium of 70 cents/b on Friday, the highest since July 31, 2015 when it was at a premium of 85 cents/b, S&P Global Platts data show.On a monthly basis, the spread between front-line cash Dubai versus same-month Dubai swaps has risen to average a premium of 46 cents/b in October to-date, almost double the average premium of 21 cents/b for the whole of September.The Middle East sour crude market has strengthened this month as Asian end-user demand remained strong due to the winter season in North Asia and as product margins remained relatively healthy, while opportunities for arbitrage cargoes from the West remained limited.Article continues below…On the supply side, Asian refiners are faced with tightening crude exports from Middle East as Saudi Aramco and Abu Dhabi National Oil Co. have announced term allocation cuts to customers as part of their commitment under OPEC’s November 30, 2016, deal to reduce production by 486,000 b/d and 139,000 b/d, respectively, from last October levels.The stronger Middle East crude structure as well as rising cash differentials have caused Asian refiners to seek alternative grades this week.Taiwan’s Formosa Petrochemical Corp. this week issued a tender seeking a 730,000 barrel cargo of ESPO Blend crude for delivery in December. The tender closes on Friday with same day validity.The Taiwanese refiner issued the rare tender for the Far East Russian grade to “check the economics of buying ESPO” in view of the current strength in the Middle East sour crude market, according to a source close to the matter.Formosa typically issues tenders seeking Middle East sour crudes such as Oman or Banoco Arab Medium crudes.Earlier in the week, Sri Lanka’s Ceylon Petroleum Corp., or Ceypetco, has also issued a tender seeking a crude “similar or better than” Murban crude for delivery over December 1-5 or December 4-5.At the same time, the refiner issued a tender seeking a 700,000-barrel cargo of Murban crude for delivery over December 1-5 or December 4-5. Both tenders closed on October 11 and were valid for three days after the close.Prior to the issue of these tenders, Ceypetco was heard to have cancelled a tender seeking a 700,000-barrel Murban crude cargo for delivery over November 29-December 3 as the offer prices received were higher than expected, a source with direct knowledge of the deal told Platts.Meanwhile, traders on Friday noted that fewer Al-Shaheen crude cargoes were expected for December due to shipment delays caused by an unspecified field production issue.Last month, a total of up to 15 cargoes were available for November-loading last month, they said.Qatar Petroleum, on behalf of North Oil, has issued a tender offering two cargoes of the crude, in quantities of either 500,000 barrels or 600,000 barrels each, for loading over December 19-20 and December 23-24.In contrast, Qatar Petroleum offered four November-loading cargoes last month.”With only two cargoes in [Qatar Petroleum’s] Al-Shaheen tender, maybe the [medium-heavy sour crude] market will [continue to] be supported,” said a East Asian crude trader.–Ada Taib, ada.taib@spglobal.com–Edited by Maurice Geller, maurice.geller@spglobal.com

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