First Murban cargo declared through Dubai MOC process

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Singapore —
The Platts crude Market on Close assessment process in Asia saw its first cargo of Murban crude declared via a convergence of Dubai partials on Thursday.

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France’s Total declared the 500,000 barrel clip of Abu Dhabi light sour crude to Anglo-Dutch major Shell, upon selling its 60th partial of August Dubai crude to Shell at a price of $62.59/b in the MOC.

This is also the first Murban cargo declared on convergence of crude partials in the MOC in 2019.

Last year, the Platts crude MOC in Asia saw the first Murban cargo declared on any convergence ever, when Total declared the grade to Shell after selling 20 partials of Oman crude to the latter in the MOC. This was in August 2018.

The year saw a total of three Murban cargoes declared via similar convergences on Oman partials traded in the MOC.

Platts included Al Shaheen and Murban crudes as alternative delivery crudes in its Dubai and Oman crude oil benchmarks from January 4, 2016.

Under the partials mechanism, the seller declares a full 500,000-barrel cargo of crude oil to the buyer after a total of 20 partials have been traded for the same loading month between the companies.

For Dubai partials, the seller has the option to deliver a Dubai, Oman, Upper Zakum, Al-Shaheen or Murban cargo, with a quality premium.

The Quality Premium for August-loading Murban crude oil was set at $0.4923/b, which is the lowest the quality premium has been since Platts started publishing the value in January 2017.

CRUDE QUALITY INVERSION

Lighter, low sulfur crude grades — typically valued at premiums to heavier and higher sulfur variants — have come under immense price pressure in recent months as global supply fundamentals have diverged along quality lines.

While US production of lighter, lower sulfur crudes has increased steadily, supply of heavier and higher sulfur crudes has dropped dramatically due to sanctions pressure on Venezuela and Iran.

The resulting tightness in medium and heavy sour crude supply has propelled prices for such grades up and closer to levels for higher quality crudes.

The Brent/Dubai EFS — a reflection of the tightening gap between light sweet and heavy sour crudes — has averaged $1.73/b year to date, touching its narrowest level of 21 cents/b just last month on May 30.

Recent strife in the Middle East, which produces a hefty chunk of the world’s high sulfur crude, have provided sturdy support to rising prices for typically lower quality grades.

Crude futures prices were 2% higher in intraday trading Thursday on reports that an Iranian surface-to-air missile shot down a US drone flying over the Strait of Hormuz.

This follows other incidents in the region in recent weeks, raising concerns among Asian traders about security of supply for sour crude barrels, prices for which are largely Dubai-linked.

MOC PARTIALS AND CARGOES

The Platts MOC on Thursday also saw two cargoes of Abu Dhabi’s medium sour Upper Zakum crude declared on convergences of Dubai partials.

Switzerland-based trader Gunvor first declared a 500,000 barrel clip of August loading Upper Zakum to Shell, when Shell picked up its 20th partial of Dubai crude from Gunvor at $62.59/b in the MOC.

China’s Unipec declared the second Upper Zakum cargo of the day to Shell, upon selling its 80th partial of August Dubai crude to the major at $62.59/b.

The Platts crude MOC saw 31 August Dubai, and one August Oman partial, each 25,000 barrels, change hands on the day.

To date in June, the MOC in Asia has seen a total of 392 partials, or 9.8 million barrels of crude concluded, with 14 cargoes declared off convergences of these partials.

Additionally, several full cargo deals have also been concluded on the MOC this month. A total of six Murban and one Das Blend crude cargoes of 500,000 barrels each have been traded via the MOC.

This brings the total count of cargoes from deals and convergences to 21, or 10.5 million barrels, in June.

Platts assessed August cash Dubai at $62.59/b, and August Murban at $63.08/b on Thursday.

–Eesha Muneeb, eesha.muneeb@spglobal.com

–Edited by Alisdair Bowles, alisdair.bowles@spglobal.com