A survey of different crude market participants conducted yesterday by S&P Global Platts speaks volumes about the plunge in official selling prices (OSP) of Middle East crude. It claims that the fall in selling prices due to weak market indicators is close to the OSP expectations in Asia.
As per a trader in Singapore, “Basically quite a fair cut — light/heavy spread is narrower as expected.” Crude prices listed recently by Saudi Aramco and Abu Dhabi National Oil company are clear indicators of the collapsing oil markets. In a notice released on February 5, the former had slashed the OSP differentials for four out of its five crude grades loading in March and flowing to Asia.
As compared to its February OSP differential, the state owned oil firm dropped price differential for its Arab Light crude and Arab Extra Light by 80 cents/b and $1.70/b respectively. De-facto OPEC leader, Saudi Arabia has also cut its Arab Medium crude price differential to Asia by 50 cents/b at a time when market expectations were reflecting a small cut of around 5-10 cents/b.
Several Asian traders highlighted that the price cuts referred by Qatar Petroleum for the January retrospective Land and Marine OSPs in no way matched other Middle East crude producers.
Reports claim that Qatar Marine was down by 25 cents/b and the January Qatar Land OSP differential to Dubai sliced 60 cents/b each month. Despite trading at a wider discount to the Abu Dhabi grade in the spot market, the Qatar Land OSP now stands at a 10 cents/b discount to light sour Murban at $67.70/b.
Several analysts claim that it would be better to wait for Qatar Petroleum to issue prospective OSP prior to evaluating spot market prices for its two grades. Traders claim that the Middle East crude buyers seemed to be comfortable waiting on the side-lines of a well-discounted market even though April cash Dubai premium over future dropped yesterday.
Based on one seller of Middle East crude oil, “There was low demand in the market last month and the buyers learned from their experience so they are in no rush to buy, there is plenty of supply as far as they are concerned.”
If the coronavirus outbreak continues its ill effects and market levels continue to drop at the current pace, it is quite likely that April loading cargoes this month will be at a discounted market price.