Qatar Al Shaheen premiums retreat sharply on month, follows Dubai structure

Quantum Commodity Intelligence - QatarEnergy has awarded its monthly Al Shaheen tender for February at sharply lower premiums compared to the previous month, as the medium sour marker crude was sold at premiums of $1.50-$1.70/b.

Qatar sold four Al Shaheen cargoes with early February awarded at around Dubai +$1.70/b, while late February was heard around Dubai +$1.50/b, reflecting the Dubai market structure.

China's Hengli Petrochemical bought at least two cargoes, while Japan's Eneos purchased one. The cargoes will load on Feb. 1-2, 15-16, 25 and 26-27, according to tender documents.

Although sharply lower on the month, the premiums versus Dubai swaps were largely in line with spot market levels, as assessed by Quantum.

Structure

The market structure has narrowed sharply this month with the M1/M3 Dubai (Feb22/Apr22) assessed by Quantum at +$1.60/b Thursday, compared to around $3.20/b when the Al Shaheen tender was awarded last month.

This puts Al Shaheen largely at parity with other medium sour grades, including Dubai and Upper Zakum, and at a discount of a few cents to Oman.

The Al Shaheen tender is closely watched as it acts as a price indicator for the Middle East medium sour crude market and is also a component of the Dubai' basket' of crudes, regularly setting the price of Dubai as the lowest of the five deliverable grades into the pricing mechanism.

As a deliverable grade into the Dubai mechanism, Al Shaheen cannot price below Dubai on a like-for-like basis, although it may trade at a negative differential in a contango market.

Upper Zakum has been setting the Dubai price this month, including two convergences in the MOC Dubai partials window Thursday, although Al Shaheen was assessed by Quantum at parity to the Abu Dhabi grade.

Dubai and Al Shaheen were both assessed at $73.35/b Thursday, up $1.38/b on the day.