According to some trade sources, Middle Eastern crude oil producers are likely to cut their official selling price (OSP) differential for October by between 80 cents to USD2/barrel after the Dubai crude structure stepped into steeper discount in August.
In August to date, the benchmark Dubai M1-M3 spread has averaged at a discount of 65 cents/barrel, down from July’s 71 cents/barrel.
Two of the Middle Eastern majors are scheduled to release their October OSPs in the next few days. Saudi Aramco is estimated to cut its Asia-bound crude’s October OSPs differentials by USD1-2/barrel, while ADNOC is seen to cut it by a tad lower by between 80 cents-USD1.20/barrel.
Previously in August, the two companies already cut their September OSPs, but the measure was insufficient to prop up the market. ADNOC slashed its key grade Murban by 90 cents/barrel from August while Upper Zakum grade was dropped by USD1.30/barrel. Aramco curbed its Asia-bound crudes by between 30-60 cents/barrel.
Meanwhile, cracks for jet fuel and gasoil were still weak this month due to the resurgence of coronavirus infection in many countries.
The second-month jet swap crack versus Dubai has averaged 51 cents/barrel to date this month, down from USD2.47/barrel in July, while the second-month gasoil swap crack versus Dubai has averaged USD5.71/barrel, down from USD6.71/barrel last month.
Going forward, some market participants expected the medium-heavy grades to see larger cuts compared to the light ones as there is an increase in demand for the light-sour grade from Japan, India, and Thailand.
In August to date, the second-month 92 RON gasoline swap crack versus Dubai has averaged USD2.76/barrel, up from USD2.62/barrel in the previous month. On the contrary, this month the medium-heavy grades have been posting tepid demand with little uptake heard from the major end-user market China.
