Kazakhstan's naphtha-rich CPC crude saw its differentials reach a two-month low on Friday, as sweet crude differentials in the Mediterranean have dipped on weak refinery margins and as condensates offers from the US into Europe have added to the perception of a well-supplied market.
"CPC is still under pressure," said one sweet crude trader, adding that the crude's value had dropped over the course of the week.
On Friday, S&P Global Platts assessed Aframax cargoes of CPC Blend, basis CIF Augusta, at a discount of 61.5 cents/b to the Mediterranean Dated strip, down 22 cents relative to the 13-28 day forward Dated Brent market from Thursday, following a competitive trade in the Platts Market on Close assessment process. A one cent contango structure was included in the 10-25 days ahead assessment period. This is the lowest level since June, when it was assessed at minus $1.20/b.
European refinery margins for light end products such as naphtha and gasoline have remained weak over the past few months and, as a result, a number of refineries have chosen to prioritize running sour crude slates over sweet.
Another factor has been increased offers for US condensates from the US Gulf into Europe, as the spread between the two main crude benchmarks WTI and Brent has widened and with freight rates remaining at rock-bottom levels, making the arbitrage look attractive.
As a result, CPC Blend had been one of the crudes most affected by the bearish factors on sweet crudes in the Mediterranean, said trading sources.
"The front end is very depressed -- few buyers around, out of the region crudes competing and a flattening of the Dated structure is encouraging refineries to run down stocks first," said a second crude trader.
Additionally, a longer September-loading program for CPC Blend in September compared with August could be contributing to the bearish sentiment around the grade, said traders.
In the Platts Market on Close assessment process Friday, Glencore sold an 85,000 mt CPC Blend cargo loading August 29 to September 2, basis CFR Augusta, to Vitol at Dated Brent minus 70 cents/b.
