North Sea spot differentials for Brent blend, Forties and Ekofisk -- together with Brent CFDs -- are expected to continue their recent slide as French strikes that have brought several French refineries to a standstill continued into their third week.
Despite signs that more French refining capacity would be operational this week, spot differentials for BFOE grades would likely fall further as large North Sea crude buyer Total remained out of the market, traders said.
"There's still a long way [down] to go [for spot differentials] for Brent, Forties and Ekofisk," a trader said.
Brent Blend, Forties and Ekofisk spot differentials slid 2 cents/b, 0.5 cents/b and 5 cents/b respectively Monday on the back of offers from BP and Vitol."The French strike is not helping the overall picture, light sweet [crude] is under pressure," a second trader said.
The restart Sunday of operations at the 274,000 b/d Grandpuits refinery -- together with a preliminary restart at some units at Gonfreville and Feyzin -- are not expected to see differentials rebound in the immediate future.
"The effect of the French [strikes] is still feeding through, they're going to have oil that they bought but didn't run for the last three weeks... it's unplanned so they hadn't under-bought, they bought oil to run and now its backing up on boats still looking to discharge... July buying will be very slow," the first trader said.
Brent Blend and Forties differentials had benefited from Glencore and Shell's June buying spree, with the latter expected to load three 2 million barrel VLCCs bound for Asia in June. Ekofisk differentials have found support from the thin June loading program, with 20 days of full field maintenance reducing loadings to a mere four cargoes.
Six VLCCs of Forties are expected to sail to Asia across May and June, satiating Asian demand for the medium-sweet grade, while poor arbitrage economics look to be curbing flows of July-loading crude to Asia.
Second-month Brent/Dubai EFS -- the spread between August ICE Brent futures and August Dubai swaps -- was trading at around $3.73/b 1300 London time, having averaged $3.45/b in May, S&P Global Platts data showed.
Meanwhile, light-sweet alternatives in the Mediterranean continue to trade weakly, with CPC blend at Dated Brent minus 50.5 cents/b, having slipped below minus $1/b last week before staging a slight recovery.
The export of Forties in June had seen differentials for BFOE grades soar above levels justified by Northwest European refining economics. North Sea crude differentials were therefore due a downward correction in order to clear into local homes, traders said.
On Monday the Forties spot differential sunk to an almost four-week low of Dated Brent minus 16.5 cents/b, following an offer from Vitol for the Nexen equity Forties F0620 cargo, loading June 30-July 2, for Dated Brent minus 10 cents/b. This followed an offer of Dated Brent minus 40 cents/b Friday for the June 14-16 cargo from Unipec, which Shell lifted in Platts Market on Close assessment process.
Meanwhile, BP offered a July 5-7 Brent Blend cargo for Dated Brent plus 5 cents/b, driving the average spot differential on the light sweet crude across the 10 day to month ahead period to Dated Brent minus 15 cents/b. Vitol also offered a July 1-3 Ekofisk cargo for Dated Brent plus 70 cents/b, though traders saw levels closer to Dated Brent plus 50 cents/b for the light-ends rich grade.
