The FOB Oseberg premium over FOB Ekofisk has increased to its highest level in over 10 months, despite many local refiners finding both North Sea sweet grades uneconomic at current differentials given the availability of cheap alternatives.
"We don't see value for end-users at where the window was printing for North Sea sweets," a trader said. "[Oseberg's rise] surprised me, not for an end-users palette... storage is probably one of the more likely options [for the grade]."
The premium of Oseberg over Ekofisk increased to 66 cents/b Wednesday, following a bid from Statoil for a December 13-15 loading cargo of the grade for Dated Brent plus 70 cents/b, while Shell offered an Ekofisk cargo loading December 16-18 for Dated Brent plus 20 cents/b.
The premium was last higher on January 7 when it hovered around a two-and-a-half-year high.
Traders found little support from either crude or product market fundamentals for the move.
The cargo Statoil bid for is committed to Phillips 66's system, with the refiner reportedly are unable to sell the cargo.
"Phillips 66 are running it in their system and can't sell it," a second trader said.
A crude trader from Phillips 66 confirmed the cargo was committed to its system.
The premium of distillates-rich Oseberg tends to rise over light-ends rich Ekofisk during winter months on the back of increased demand for gasoil for heating, while gasoline demand hits a trough during the winter.
However, current product market fundamentals in Northwest Europe have run counter to this trend in recent weeks, as the discount of the FOB ARA EBOB gasoline barge crack to the FOB ARA ULSD 10ppm barge crack has narrowed in recent weeks -- at minus $1.41/b Wednesday -- amid a strong US Atlantic Coast market, while naphtha has also found support from buying appetite in the region and steady demand from Asia for arbitrage volumes.
