Abu Dhabi National Oil Co., or ADNOC, issued official selling prices for July-loading crude that were largely steady and within expectations, sources told S&P Global Platts.
The July official selling price for ADNOC's flagship Murban crude oil was set at $66.70/b, in line with monthly average of IFAD Murban contract in May.Upper Zakum OSP discount to Murban OSP widened 10 cents/b to a discount of 50 cents/b for July loading cargoes. This compares to a spread of 38 cents/b between IFAD Murban and Platts cash Dubai, which is often used as a proxy for Murban/Upper Zakum spread.
The differentials for its lighter grades -- Umm Lulu and Das Blend -- were unchanged from June at 5 cents/b and 35 cents/b, respectively, below Murban.
The prices reflected strengthening market fundamentals, especially for lighter crude grades, traders said.
"The OSPs and cut for Upper Zakum reflect the market sentiment." said a trader with a North Asian refinery. "Last month demand from India was quite weak. This month demand should recover."
The average premium of the IFAD Murban contract in May to front-month Dubai was $1.67/b, up from $1.49/b in April.
Despite the rise in OSPs, buying activity for Middle Eastern grades is likely to remain resolute as demand scenarios improve in Asia and more so at a faster clip in the West.
"Asian buyers have to keep buying if they want to keep refineries running. Brent/Dubai spreads are shutting out the arbitrage crudes," said a crude oil trader in Singapore.
With demand in the West on an upswing, and a wide Brent/Dubai spread keeping arbitrage closed, buying Middle Eastern crude grades remains the top option for Asian refiners despite rising spot premiums, traders said.
"Arbitrage window is closed. If you compare sour grades to sweet crude, the spread is too narrow. Refineries cannot replace sour crude with sweet [grades]," said the first trader.
Market focus now moves to Saudi Aramco, which is due to announce its OSP this week.
"If Saudi follows ADNOC price for their OSPs, it's very tough for buyers. Now there seem to be few bearish factors in the market," said another trader with a North Asian refinery.
