Qatar Al Shaheen tender awarded at highest post-pandemic premium of +$1.70/b

London (Quantum Commodity Intelligence) – Qatar Petroleum (QP) has awarded its monthly Al Shaheen tender for July at sharply higher premiums compared to June, sources said Thursday.

The three cargoes, one in early July and two loading late July, were heard awarded at around Dubai +$1.70/b, compared to the June tender awards of around Dubai +$1.15-$1.25/b.

The premium was the highest paid since the coronavirus pandemic started and reflects healthy demand for Middle East barrels loading in July, plus steep backwardation on the Dubai market structure as the M2-M4 widened to around $1.40/b this week, according to Quantum data.

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.

Most of the $1.70/b premium is built into the market structure, as July-loading cargoes are priced against Platts Dubai assessments during the month of July - when September is the front-line month for Dubai.

On Wednesday, Quantum assessed the M2-M4 (Jul-Sep) Dubai spread at $1.38/b, which automatically gives Al Shaheen a premium of $1.38/b against the underlying July price - which is also the July Dubai swap.

The contango has since softened to under $1.30/b Thursday, as the possible increase in Iranian exports later this year dampens market sentiment.

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.

At close of business Thursday in Asia (1630 Singapore) Quantum assessed July cash Al Shaheen at $65.00/b, or parity with Dubai. Traders said Oman, Upper Zakum and Al Shaheen are all at around Dubai parity for July delivery.