Asian refiners are increasingly purchasing Middle Eastern light crude oil cargoes, specifically Abu Dhabi’s Murban, Das, and Umm Lulu grades, as high Brent prices limit the arbitrage opportunities from the U.S., Europe, and Africa. This trend has driven the Murban benchmark to its highest level this month.
In recent weeks, refiners from South Korea and Japan have secured spot cargoes for October loading, with Indian Oil Corporation buying 3 million barrels of Murban via a tender. As a result, the premium for October Murban crude futures rose by 23 cents to $1.41 a barrel, marking the highest level for the month.
The shift towards Middle Eastern oil comes as U.S. West Texas Intermediate (WTI) crude has become more expensive, with offers for WTI to Asia at $5-$6 above Dubai quotes for November delivery. This pricing trend has persisted for a second consecutive month, limiting the supply of light sweet crude to the East.
European and West African crude have also seen price increases, with Brent’s premium to Dubai quotes reaching a 10-month high earlier this week. Traders attribute this strength to the backwardation in their market structures, indicating tight supply conditions.
Despite the strength of the Murban benchmark, weak demand from China is putting a cap on Middle Eastern crude prices, particularly for medium sour crude benchmarks like Dubai and Oman, which have not kept pace with Murban’s gains.