March 30, 2020 [S&P Global Platts] – Traders of Middle East sour crude emerged from the sidelines to buy all four cargoes offered in the Platts Market on Close assessment process in Asia Wednesday, picking up several million barrels.
Most of the cargoes are likely to end up in storage to be sold when market conditions improve, according to onlookers in the wider market. “All the traders snapping up [cargoes] for storage I guess,” said a buyer for a North Asian refinery after the end of the Platts MOC.
Several market players in the Middle East sour crude industry have chartered crude vessels and explored other avenues for storing excess crude volumes floating in the market this month, as OPEC+ producers ramp up exports while demand slides on bleak product margins and low economic activity.
Trading arms of major oil industry participants such as Glencore and Shell have reportedly hired VLCCs for floating crude in Asia this month. Other traders may well follow suit once freight rates ease off from a sharp rise in recent weeks, market participants said.
Deepening contango spreads along the Dubai futures curve and for the Dubai cash/futures spread would make storage economics workable if costs for freight tread lower and availability of storage tanks increases in the coming days, sources said, adding that could be increasingly likely by the time Wednesday’s crude purchases are ready to load in May.
Middle East cargoes typically trade well ahead of scheduled loading dates, with April- and May-loading cargoes currently trading in the spot market. Seller Total offered a 500,000 barrel cargo each of Das Blend and Murban crudes, while ExxonMobil offered two cargoes of Upper Zakum, priced against the OSP and front-month cash Dubai.
Total offered a May loading cargo of Murban on the MOC, lowering it past a discount of $1.50/b to the OSP. Murban was recently purchased by a Japanese refiner at a discount of $1.60/b to the OSP, but Total’s offer Wednesday pushed well past this level without any buying interest seen. The cargo was purchased by Japanese trader Mitsui when the seller offered at minus $2.10/b.
Total’s other offer, for a May loading cargo of Das Blend fell to a discount of $3.30/b to the Das OSP — the lowest on record for the grade — before being bought by Shell at that level.
Meanwhile, both of ExxonMobil’s offers for Upper Zakum crude were purchased by trading house Gunvor toward the end of the MOC. Gunvor picked up the cargoes of Upper Zakum at discounts of $4.60/b to Platts front month Dubai crude assessments and $1.60/b to the Upper Zakum OSP.
That brought the total number of full-sized cargoes traded via the MOC this month to eight, equivalent to February. Of those, four cargoes have been of Murban, three of Upper Zakum and one of Das Blend.
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