Kazakhstan's CPC Blend crude dropped to its lowest differential relative to the forward Dated Brent market in a month in European trading Friday, on the back of deteriorating local demand coupled with a closed arbitrage making voyages to eastern Asia uneconomical.
On Friday, S&P Global Platts assessed Aframax cargoes of CPC Blend at a discount of 48 cents/b versus the Mediterranean Dated Brent Strip, its lowest value relative to the 13-28 day forward Dated Brent market since July 19. The differential was down 25.5 cents/b compared with Thursday's close.
"I think the CPC Blend drop today was slightly larger than some of us expected," a trader said Friday.
In Friday's MOC Glencore offered a Suezmax cargo of CPC Blend for loading August 28-September 1 at Dated Brent minus 60 cents/b, which remained outstanding at the end of the process.
Larger Suezmax tankers used to ship CPC Blend to Asia may now need to find a home in the Mediterranean basin because of the closed arbitrage east, adding further downward pressure on differentials, sources said.
"Sales of CPC Blend cargoes need to be watched carefully. They are not easy to sell into the East at the moment and I am not sure how strong demand is for them within Europe. If we see several of these unsold towards the end of the week it could further put downward pressure on the grade," a trader said.
Other factors likely to affect CPC Blend values, and the sweet complex in general, will be the length of the Siberian Light program. Traders are expecting between four and seven cargoes to load in September.
However, traders also pointed out that the large drop at the end of last week for CPC Blend could lead to some upward correction for differentials this week.
