Qatar issues Al Shaheen tender, premiums expected to tumble
Quantum Commodity Intelligence – QatarEnergy has issued a sell tender for its keenly-watched Al Shaheen grade, with premiums for the Middle East medium sour crude set to slump to around three-year lows on February-loading barrels.
Qatar is offering just two cargoes of its flagship crude grade, rather than the usual three, with bids closing on 13 December and valid until 14 December. The tender includes one early February cargo and one late month.
Trading sources expect the grade to sell at premiums sharply discounted from the previous tender when January crude was sold at +$1.60/b to +$1.75/b versus the underlying Dubai, but prior to that, December cargoes averaged around Dubai +$3/b.
Based on indications Tuesday, sources said Al Shaheen is likely valued at around Dubai +$0.50/b, the lowest premium in around three years, said traders.
Middle East medium sour grades have generally commanded healthy premiums to the underlying Dubai swap since late 2020, even soaring to record premiums of up to +$10/b in the wake of Russia's invasion of Ukraine and subsequent sanctions on Russian crude oil.
Premiums for medium sour grades have been struggling in the fourth quarter amid softer refining margins, the eroding risk premium around the Middle East conflict and fears over a demand slowdown.
The premiums are largely a function of the market structure, as Al Shaheen prices during the month of loading, so it includes two months of backwardation – hence, during the loading month of February, April is the trading month for Dubai.
So far in December, the M1/M3 (Feb24/Apr24) Dubai cash spread had been averaging around $0.50/b, according to Quantum data, but on Tuesday, it crunched to around a three-year low of +$0.20/b. When last month's tender was awarded, the M1/M3 spread was close to +$1.50/b.
Bellwether
The regular monthly tender from Qatar is seen as a bellwether for the Middle East medium-sour crude market, as the grade is 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.
Al Shaheen is also seen as a directional guide for Saudi Aramco's flagship Arab Light OSP, which traders said is on course for a steep reduction on February-loading crude versus the current Platts Dubai/DME Oman +$3.50/b.
The state-owned energy producer also issued tenders for one cargo each of Qatar Land and Marine grades.
QatarEnergy set Qatar Marine for January at a premium of +$0.90/b versus Platts Dubai, down $1.10/b on the month, while Qatar Land was slashed from +$2.35/b to +$0.10/b.
