Prices of dirtier, sludgier oil in Asia are surging, flipping the premiums usually commanded by lighter crudes and offering further evidence that Saudi Arabia’s prolonged supply cuts are tightening the market.
(Bloomberg) — Prices of dirtier, sludgier oil in Asia are surging, flipping the premiums usually commanded by lighter crudes and offering further evidence that Saudi Arabia’s prolonged supply cuts are tightening the market.
The value of more sulfurous and dense varieties, known as medium-sour crudes, has topped those of lighter, better-quality oils such as Abu Dhabi’s flagship Murban, according to traders and data compiled by Bloomberg. The shift, seen in physical and futures markets, is a reversal of the usual pattern.
Benchmark crude prices slumped in the first half even as Saudi Arabia vowed to restore balance to the global market by curtailing supplies, rolling back output along with fellow OPEC+ members including Russia. The results of that drive are now beginning to be felt in earnest, with Brent topping $80 a barrel last week for the first time since May and traders chasing medium-sour crudes that have been more affected by the production cuts.
In the physical market, cargoes of Upper Zakum for September loading have been discussed at a premium above $1.80 a barrel to the Dubai benchmark, whereas Murban was valued just above $1.80 on the ICE Futures Abu Dhabi platform on Friday. In futures, front-month Oman topped Murban last week.
In addition, some refinery outages in Japan, as well as an earlier buying spree of lighter crude from the US, are also likely to weigh on the purchasing of grades like Murban, traders said.
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