Iraqi Basrah crude premium strengthens amid Venezuelan disruption
By Eesha Muneeb / Platts
Petroleumworld 03 22 2019
Premium for Iraqi crude continue to strengthen this month highlighting the supply tightness in medium, heavy sour crude supply seen globally since disruption of exports from Venezuela.
Iraq's SOMO was heard to have awarded up to 3 million barrels of Basrah crude loading over April in premiums ranging from 60 cents for Basrah Light and up to $1.50/b for Basrah Heavy over their respective OSPs for Asia, crude oil traders with knowledge of the tender results, said Thursday.
The premiums have surpassed market expectations, especially for Basrah Heavy. Prior to the trade, S&P Global Platts on Wednesday assessed April Basrah Light cargoes at a premium of 55 cents to the OSP and Basrah Heavy at a premium of 85 cents to the OSP.
Crude oil traders in Asia emphasized the turnaround in market fundamentals, leading to higher demand from buyers for heavier, high sulfur barrels for their refining systems across India, China and other major refining centers in the continent.
"The Basrah [grades] are heavy, sour crudes that are in short supply, and yield products that are very profitable at the moment," a source close to the matter told S&P Global Platts.
SOMO had offered 2 million barrels of Basrah Light crude in a single cargo loading April 28-30, which it awarded at a premium of 60 cents/b over the Light crude OSP for Asia in April.
The Iraqi state-owned entity also awarded 1 million barrels of Basrah Heavy crude in the same tender at a premium of $1.50/b to the Heavy OSP for Asia in April. The cargo is slated to load April 13.
Both awards were made to a single Chinese trading company, said sources.
"[Buyers] are paying so much [for Basrah crude] because [their] own system is short heavy sour, which they can't access [from alternate sources] such as Venezuela etc.," said one crude oil trader on Thursday morning.
"60 cents/b on Basrah Light is not unreasonable, given current sour crude market levels,? the trader added.
The Iraqi seller was reported to have issued a fresh tender for 4 million barrels of Basrah Light and Heavy grades late Wednesday, crude market participants told Platts on Thursday. Traders expect the second tender to be awarded at similar premiums, they said.
Tight supply of medium and heavy sour crudes in Asia also pulled up the Middle East sour crude complex on Thursday.
Cash Dubai's premium to front-month May Dubai swap was pegged a tad strong mid-morning in Asia at a backwardation of 52 cents/b compared to 49.5 cents/b as of 4.30 pm Wednesday evening in Singapore.
Additionally, May cash Dubai stood at $68.18/b, a premium of 51.5 cents/b over May ICE Brent Futures as of 11 am in Singapore (0300 GMT) on Thursday, up 9 cents/b from its premium over Brent at the close of Asian trading on Wednesday.
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Story by Eesha Muneeb from Platts / SPGlobal.
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