The supply cuts imposed by OPEC+ are reverberating in Middle Eastern crude markets, with Asian buyers turning to US barrels and putting a lid on a key light variety, while aiding more sulfurous, sludgy cargoes.
The premium of Abu Dhabi’s flagship Murban, which is less dense than other Middle Eastern grades such as Dubai and Oman, has been hurt as importers undertake a buying spree of comparable light US oil. In this monthly cycle, they’ve picked up about 50 million US barrels, more than usual, traders said.
At the same time, heavier barrels remain in favor given the cuts delivered by Saudi Arabia have tightened supplies of these grades. In the middle of the month, more sulfurous Oman was valued above Murban, a rare reversal.
Led by Riyadh and Moscow, the Organization of Petroleum Exporting Countries and its allies have been cutting production to stem a slide in prices that dominated the first half. Their tactic appears to be yielding dividends, with Brent rebounding by about 12 percent in July. It’s also altering underlying market dynamics as users adjust to lower availability of certain grades.
From here, medium and heavy-sour grades — such as Oman, Upper Zakum and Al-Shaheen — will keep outperforming lighter varieties given the curbs, according to Energy Aspects Ltd. In these circumstances, Murban will be setting key measures like Dubai timespreads, the industry consultant said in a note.
Saudi Arabia is seen extending its voluntary 1 million-barrel cut into September, according to 15 of 22 traders, analysts and refiners surveyed by Bloomberg.