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Unsold May Al-Shaheen cargoes seen weighing on June Qatari crude tender, OSPs
4/14/2020 12:00:00 AM

An overhang of unsold May Al-Shaheen crude cargoes from last month's trading cycle is likely to weigh on the ongoing crude tender for the medium-heavy crude grade, market participants told S&P Global Platts Wednesday.

"There are a lot of unsold Al-Shaheen [cargoes] from May," a source at an Asian refinery told Platts.
The overhang of May cargoes -- which were initially offered to buyers in the Middle East crude market in March -- have added supply pressure to incoming June-loading cargoes of Al-Shaheen crude that will be offered on the spot market through April.
An initial offer for two June-loading Al-Shaheen cargoes by Qatar -- the country where the crude is produced -- is likely to see tender participants put in lower bids while taking into account the existing surplus on the spot market available to them.
Results from the "June QP tender will be out today but this may be under pressure from the unsold May cargoes," the source added.
Separately, a June-loading cargo of the grade was reportedly picked up by a North Asian refiner Wednesday, at discounts of around $8.50/b to Platts front-month Dubai crude assessments.
By comparison, tendered cargoes of May loading Al-Shaheen crude were sold at an average of minus $3.07/b against Dubai last month.
Falling Asian demand for crude oil between March and April, combined with a spike in Middle East production over March have caused the market in-equilibrium between excess supply and low demand to widen. As a result, the underlying market structure for Middle East crude has declined sharply between March and April.
The prompt cash Dubai's discount to futures, which averaged minus $3.11/b over March, widened to minus $9.27/b to date in April, Platts records showed Wednesday.
Low bids for Marine and Land cargoes
Qatar has also offered a cargo each of its Land and Marine crudes via the latest tender, in addition to two 500,000 barrel clips of Al-Shaheen crude.
Low demand and a sinking structure for Middle East crude are likely to prompt tender participants to post very low bids for the Qatar Land and Marine cargoes as well, said market sources.
At least two market participants said bids for the two grades could go down to near minus $10/b levels, in line with the current Dubai cash/futures spread. The spread was assessed at minus $10.27/b on Tuesday at the 0830 GMT Asian close.
"We should see very low levels on the QP tender," said a trader based in Singapore Wednesday.
Given the low market structure, "there is definitely a lot of pressure on these cargoes" offered for the June loading cycle, the refinery-linked source added.
The tender, which closed April 14, is valid until Wednesday, with results expected to be announced later this evening in Asia.
Pressure on Qatari OSPs
Deep discounts fetched for Qatar's Land and Marine cargoes in the tender could have bearish implications for the country's official selling prices, which are yet to be announced for the latest cycle, said market participants.
"Seems Qatar will need to be more aggressive [on OSP cuts] to push their barrels this month," a China-based source told Platts.
Some market participants mentioned that the state should have issued its official selling prices prior to its tender, which would have allowed it to set prices at a competitive level against heavy price cuts issued by Saudi Aramco earlier this week.
"This will not be good for their OSP, to have it issued after the tender," the first source said.
"Now if they get a [low] bid on Qatar Marine or Qatar Land [in the tender], the OSP is going to be more towards that," the second trader added.
Qatar will issue official selling prices for May loading crude exports this month. The state recently switched its price methodology from a retrospective method of setting OSPs to a forward-looking one, with official selling price differentials set against the average of Platts Dubai and Oman crude assessments each month.
Source: SP Global
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