The Middle East crude market fell on Thursday, with offers for February loading Murban heard at a premium of around 10 cents a barrel to the official selling price (OSP), lower than levels seen last month.
Weakening middle distillates and fuel oil cracks, and a still soft naphtha market in Asia could see premiums for February cargoes narrowing, traders said. Two Asian refiners, Korea's GS Caltex and Singapore Refining Company, cut their runs due to poor margins, industry sources said on Thursday.
"It's a tough situation for refiners, with margins still weak and premiums very high. We are monitoring arbitrage cargoes," said a trader with a North Asian refiner. Traders are watching for the potential to pull Brent-linked crude from the West to Asia as the Brent/Dubai EFS narrows, although it is unclear whether the economics is workable at this point.
Reflecting the softening market, Oman February futures traded on the Dubai Mercantile Exchange slipped below $3.00 a barrel to Dubai quotes by 0830 GMT. Shell bought one Dubai partial from ChinaOil at $109.20 a barrel. The oil major sold one Oman partial at $109.45 a barrel. The Brent/Dubai Exchange of Futures for Swaps (EFS) for February was assessed at $3.39, narrowing 19 cents from the previous session.
February Oman traded on the DME at $2.96 to Dubai swap quotes at 0830 GMT, down 4 cents from Wednesday, using the settlement price for DME futures, the ICE Brent one-minute market for Singapore and the Brent-Dubai EFS as calculated by Reuters. GS Caltex, South Korea's second largest refinery, is cutting crude runs this month by 2.7 percent to 710,000 barrels per day (bpd) because of worsening margins, company sources said on Thursday. Kuwait Petroleum Corp (KPC) has signed a Memorandum of Understanding with Chinese oil trader Unipec for crude oil supply over the next decade, saying the volume would be raised to at least 300,000 barrels per day (bpd) by the end of 2021, KPC said.
China is pressing Sudan and South Sudan to resolve a row over oil transit fees by late December to prevent more export disruptions from the newly separate nations, China's special envoy said on Wednesday.
Complex processing margins for Dubai in Singapore were at $6.76 per barrel, up from an average of the last five days of $5.47, Reuters data shows. Over the last year, the average margin has been valued at $8.19 per barrel.
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