SINGAPORE: Middle East light crude oil cargoes loading in October have sold in Asia at the widest discounts since 2015 as sellers try to clear a backlog of supplies from the previous month, several trade sources said.
Spot discounts for crude grades such as Abu Dhabi’s Murban and Das as well as Qatar Land have dropped to about 70 cents a barrel against their respective official selling prices (OSPs), they said.
The OSPs, or price references for these grades, have been uncompetitive while Middle East light oil have been displaced in Asia by arbitrage supplies from Europe and the United States, the sources said.
“The OSPs were too high to begin with and they were under-adjusted last month,” a Singapore-based trader said.
Middle East producers have also increased exports in the third quarter after the Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia agreed to raise output in June.
Higher Middle East crude supplies coincided with a rise in arbitrage inflows from Europe, the Mediterranean and Africa after a sharp drop in Brent crude’s value against Middle East benchmark grade Dubai made such shipments profitable last month.
The arbitrage window for US light crude to Asia is also open, allowing cargoes such as West Texas Intermediate (WTI) Midland and Bakken to head east, the sources said.