Ample availability of grades like Oman, Murban, and Iraqi crude forced physical benchmark premiums down significantly from their prior $8-a-barrel monthly averages. Middle Eastern export flows held robust throughout autumn, even touching record Murban volumes from the United Arab Emirates. Meanwhile, independent Chinese refiners have pivoted to discounted barrels from Brazil and West Africa. This soft buying interest has been further exacerbated by shrinking Asian processing margins following unexpected Chinese fuel export quotas.
Key points
Regional suppliers face heavy competition in China from deeply discounted Brazilian and W…: Regional suppliers face heavy competition in China from deeply discounted Brazilian and West African barrels.
Heightened vessel attacks in the Strait of Hormuz have failed to curtail the high volume…: Heightened vessel attacks in the Strait of Hormuz have failed to curtail the high volume of regional oil shipments.
Deteriorating Asian refining margins are prompting processors to pause purchases of Middl…: Deteriorating Asian refining margins are prompting processors to pause purchases of Middle Eastern crude.
Sources checked by our analysis pipeline: 1
Middle Eastern producers ramped up crude exports in September and October, which J.P.Morgan analysts said has created a surplus, despite rising attacks on vessels transiting the Strait of Hormuz.
The wave of supply has depressed Middle Eastern crude benchmarks this week to their lowest premiums since July, when an initial agreement to end the US-Israeli war with Iran enabled more Gulf oil exports through the Hormuz strait.
Dubai's cash premium to swaps slumped to 65 cents a barrel on Monday, the lowest since July, before recovering to $1.55 a barrel on Thursday, Reuters data showed.
Oman's premium dropped to 95 cents a barrel on Tuesday, the weakest since July, before nudging up to $1.76 on Thursday, Reuters data showed. These premiums marked a big drop from last month's average of about $8 a barrel.
Unsold December-loading cargoes of Oman, Murban and Iraqi crude from last month's trading cycle pressured spot premiums, three traders in the market said.
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