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Petroleum industry

Crude Oil Market Shifts: Regional Pressures and Increased Competition

Strategic Insights

— 1 min read

The global crude oil market is undergoing significant changes, with regional sour crudes facing pressure from rival exports. In the Mediterranean and northwest Europe, the introduction of Iraqi sour Kirkuk is expected to put strain on regional sour producers, including Russian Urals. At the same time, refiners in the US Gulf coast have a wide range of light sour cargoes to choose from, including Iraqi Basrah Light and Russian Urals.

Key Takeaways:

  • Iraqi state-owned marketer Somo's tender to sell rival sour Kirkuk has resulted in six major oil companies, including Shell, Total, Eni, and Repsol-YPF, securing 1mn bl cargoes each. These cargoes are expected to head to northwest Europe, leaving 3mn bl in the Mediterranean.
  • The introduction of Kirkuk to the Mediterranean market is expected to put pressure on regional sour producers, including Russian Urals, which may see a decrease in demand.
  • Up to 6mn bl of Iraqi sour Basrah Light is expected to enter the Mediterranean market at the same time, further exacerbating the pressure on regional sour crudes.
  • State-owned Saudi Aramco's decision to cut April term allocations by 12-13% to Asia-Pacific has supported the spot market, with May Oman's premium to its MOG retroactive selling price gaining 7cents/bl.
  • Medium sour Banoco Arab Medium is expected to gain at least 10cents/bl due to lower Saudi term volumes of the grade.
  • Iran, Qatar, and Kuwait are expected to provide their customers with term volumes similar to March.
  • Most April Asia-Pacific crude cargoes are committed, but high outright prices of benchmark Tapis have made it difficult to sell some regional light crude.
  • At least 1mn bl of light sweet Malaysian crude is still on offer, despite high Tapis premiums, meaning light sweet grades may continue to face downward pressure.

Statistics:

  • 1mn bl cargoes each secured by Shell, Total, Eni, Greece's Hellas, Tupras, and Repsol-YPF in Somo's tender
  • 3mn bl remaining in the Mediterranean after Shell, Total, and Repsol-YPF's cargoes are sold
  • 6mn bl of Iraqi sour Basrah Light expected to enter the Mediterranean market
  • 12-13% cut in April term allocations by Saudi Aramco to Asia-Pacific
  • 7cents/bl gain in May Oman's premium to its MOG retroactive selling price
  • 10cents/bl expected gain in medium sour Banoco Arab Medium
  • 40-50cents/bl lift in premiums for Indonesian crude against March levels

Sources:

  • [1] Bloomberg
  • [2] S&P Global Platts
  • [3] Saudi Aramco
  • [4] Reuters

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