September loading cargoes of Middle Eastern sour crude grades are expected to trade at premiums to their official selling prices in the spot market, due to a combination of positive margins, higher Saudi Arabian OSPs for comparative crudes and lower arbitrage flows into the region, trading sources said Friday.
"All grades should trade at premiums [to their respective OSPs]," a trader said.
"September [trading] looks okay. The spot market should be supported by the high Saudi OSPs," another trader said.
Saudi Aramco raised OSPs for its crude grades by 50-85 cents/barrel for August loading cargoes. This was leading some Asian refiners to look at alternative grades for September as the Saudi grades were too expensive for them, sources said.
"Saudi OSPs are massive so you may see some people down their tolerance [for Saudi barrels] and go for spot grades," a trader said.
This was echoed by another trader who said: "Everything looks cheap versus the [Saudi] OSPs."
Abu Dhabi's Murban crude was heard to have traded at a premium of between single and low double digit to the grade's OSP for September loading cargoes, with an Indian refiner heard to have bought at least one cargo of the grade.
In contrast, for August-loading cargoes, the grade had traded at a discount of around 30 cents/b to its OSP.
In addition, Murban also found support as it was seen as a replacement for North Sea crude amid lower arbitrage flows into Asia, sources said.
September-loading cargoes of Qatar Marine were heard to have been offered at around a small premium to the grade's OSP. While August loading cargoes of the grade had traded at discounts of 10-15 cent/b to the OSP, sources said.
One grade that is trading at lower levels compared with last month, however, is Bahrain's Arab Medium, or Banoco crude, which is typically traded as a differential to Saudi Arabia's Arab Medium crude OSP.
Saudi Arabia's Arab Medium crude saw the biggest rise in OSP, increasing by 85 cents/b from the July OSP, to Oman/Dubai plus 90 cents/b for August loading cargoes.
Banoco was heard offered at a premium of around 10-20 cents/b to the OSP for September loading barrels.
In contrast, during August the grade was heard to have traded around 30-40 cents/b premium to the OSP.
One trader said that the offer [for Banoco] was "like a fishing tool. I expect the September OSP to be much lower."
