MOMR July 2015

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Crude Oil Price Movements
The light sweet/medium sour crude spread
Sweet/sour differentials narrowed in Europe and Asia, while widening in the US Gulf
Cost (USGC).
In Asia, the sweet/sour spread, represented by the Tapis/Dubai spread, continued to
narrow as firm demand from Asian refiners continued to support the Mideast Gulf crude
market, but signs of higher arbitrage shipments to the region started to create pressure.
Refining margins in Asia are still holding well above average for the past year.
Oversupply in the Atlantic Basin has switched the 78¢/b North Sea Dated premium to
Dubai in May to a 7¢/b discount in June. This has widely opened arbitrage from west to
east, pressuring the Asia Pacific light sweet market. Supply is plentiful in the Asia
Pacific region, with abundant storage and an increase in Malaysian crude production
weighing on prices. Asia Pacific cargoes came under further pressure as cargoes were
sold from storage, adding to the region’s supply glut. Over the month, the Dubai crude
discount to Tapis dropped 89¢ to $4.20/b. In January, the spread was close to $7/b.
Graph 1.5: Brent Dated vs. Sour grades (Urals and Dubai) spread, 2014-2015
In Europe, the Urals medium sour crude discount to Brent flipped into a significant
premium in June amid a shortfall of Iraqi Kirkuk and Russian Urals in contrast to
plentiful light sweet crudes. High freight rates have cut the flow of Baltic-loading Urals
to Mediterranean markets. Loading delays at Ceyhan in Turkey, the terminal for Kirkuk,
reached around 20 days, prompting some cancellations. This has boosted demand for
alternative sour grades such as Iraq’s Basrah Light and Colombian Vasconia. On the
other hand, oversupply in the Atlantic Basin of unsold North Sea cargoes and of West
African crude has eroded light sweet North Sea Brent crude prices. Supply was strong,
while European and Asian refinery demand was less than expected. Higher production
from the Buzzard field and the deferring of a maintenance shutdown to October from
June has boosted supplies. The Urals Med discount of 1¢/b in May to Dated Brent
moved to a premium of 83¢/b in June.
In the USGC, an unanticipated increase in the supply of June medium sour crude in
Louisiana pressured sour grade July Mars. However, firm demand for naphtha-rich
crude and strong gasoline crack spreads supported Light Louisiana Sweet (LLS); LLS’s
premium to Mars increased by nearly 65¢ to $4.80/b.
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02 Feb09 Feb16 Feb23 Feb02 Mar09 Mar16 Mar23 Mar30 Mar06 Apr13 Apr20 Apr27 Apr04 May11 May18 May25 May01 Jun08 Jun15 Jun22 Jun29 Jun06 Jul
US$/b US$/b
Dubai Urals
10 OPEC Monthly Oil Market Report – July 2015