Qatar Al Shaheen crude tender awarded, premiums slump
Quantum Commodity Intelligence – QatarEnergy has awarded its monthly Al Shaheen tender for July loading at the lowest premiums since the early part of 2021, reflecting the softer Middle East market for physical barrels.
The state-owned firm was heard to have awarded five cargoes of the medium sour grade at premiums ranging from as low as +$0.80/b versus the underlying Dubai swap for late-month cargoes, to around +$1.05/b for early-July cargoes, reflecting the backwardation.
Last month, the June tender was awarded at Dubai swaps plus up to $2.40/b versus the underlying Dubai swap for an early-month cargo, to around +$2/b for end-June cargoes.
Al Shaheen is priced during the month of loading, so includes two months of backwardation – hence during the loading month of July, September is the trading month for Dubai.
Weakness in the physical market has been manifested in the market structure, with the prompt spread crunching this month to the lowest levels since a brief period of weakness in April 2021.
So far in May, the M1/M3 (Jun23/Aug23) Dubai cash spread has averaged at $1.22/b, but was assessed by Quantum on Thursday at $0.70/b - an early indication that Middle East OSPs are set for a sharp cut on July-loading cargoes, unless OPEC makes further output reductions.
Winners
Tender winners were said to likely include Shell, Exxon, Total and Vitol, while the July program is expected to be 18-19 cargoes, compared to the usual 15-16 cargoes.
Sources said sluggish spot physical demand has been exacerbated by upcoming refinery maintenance in China, although relatively low spot prices should help clear out the June and July programs from the Middle East.
The Al Shaheen tender is closely watched as it acts as a bellwether for the Middle East medium-sour crude market and is also a component of the Dubai 'basket' of crudes, often setting the Dubai print as the lowest of the five deliverable grades into the pricing mechanism.
The tender award puts Al Shaheen at parity to Upper Zakum and Oman, with all three grades setting the Dubai assessment so far this month as part of the 'Dubai basket' crudes, which also includes Dubai and Murban.
It is also seen as a guide for Saudi Aramco's flagship Arab Light OSP, which traders said will likely see a significant reduction for July-loading cargoes from the current Platts Dubai/DME Oman +$2.55/b.
