Bloomberg reported that a slide in Middle East crudes to the lowest in almost a year relative to benchmark prices is showing no sign of ending as Saudi Arabia offers extra cargoes to overseas refiners and cuts export costs.
Murban, the main export grade of Abu Dhabi, traded 10 cents below monthly prices set by the Abu Dhabi National Oil Company, the largest discount since August. It has averaged 29 cents higher this year. Qatar Marine was at a discount of 65 cents, the most in more than a year. Both grades may slip further this month.
According to six refiners who received the proposals, Saudi Arabia, the Organisation of Petroleum Exporting Countries biggest producer is offering additional cargoes after it failed to persuade fellow OPEC members to raise output targets at a June 8th 2011 meeting.
Saudi Arabian Oil Company has cut the price of some July shipments to Asian buyers amid concern oil as high as USD 100 per barrel is slowing the global economic recovery and threatening demand.
Mr Eugene Lindell an analyst at JBC Energy GmbH said that "A lot of the decline goes back to Saudi Arabia itself and the latest tranche of official prices. When the kingdom does such a large discount, you tend to see less action on the spot market because those customers that can will try to max out their volumes of Saudi crude. That means they are less inclined to shop on the spot market."
According to data compiled by PVM Oil Associates Limited, Murban last dropped to as much as 10 cents below its benchmark price on August 18 last year as refiners cut demand amid shrinking margins. The discount disappeared within two weeks.
Mr Ali Al Naimi oil minister of Saudi Arabia said after the deadlocked OPEC meeting in Vienna that his country would keep meeting the needs of the market regardless of the disagreement. The nation, together with Kuwait, Qatar and the UAE, had proposed increasing OPEC production by 1.5 million barrels per day. They were blocked by members including Libya, Angola, Ecuador, Algeria, Iran and Venezuela.
Six people from companies based in those markets said that Dhahran based Saudi Aramco has offered extra cargoes to refiners in countries including India, South Korea, Taiwan, Japan and China. A Saudi industry official with knowledge of the matter had said June 10 that Aramco planned to pump more crude, without saying by how much.
Mr Ehsan Ul Haq senior market analyst with KBC Energy Economics in Walton on Thames, England said that "The market would like to see Saudi barrels and if they are able to get them and the prices are reasonable then Asia will certainly buy more. Whether demand is lower, it's too early to say."
Prices may still be supported as European crude costs outpace those from the Middle East, limiting the attractiveness for Asian refiners of alternative grades from Russia or West Africa, which are priced against London traded Brent, the benchmark for more than half of the world's oil.
(Sourced from Bloomberg)
(Sourced from Tehran Times)
