Qatar issues Al Shaheen tender, premiums seen sharply lower

Quantum Commodity Intelligence - QatarEnergy has issued a sell tender for three cargoes of its keenly-watched Al Shaheen grade, loading in January, with premiums for Middle East medium sour crude grades currently languishing at around the lowest levels since Russia's invasion of Ukraine.  

Al Shaheen for January was valued at $2.60-$3/b over Dubai swaps, whereas December-loading cargoes were awarded at premiums of $4-$4.40/b versus underlying Dubai swaps.

The three cargoes for January are one on early-month dates and two for late-January, with bidding closing Tuesday 15 Nov. and validity until 16 Nov.

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.

The expected lower 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 January, March is the trading month for Dubai.

The key M1/M3 (Jan23/Mar23) spread, which regional producers closely monitor, has averaged around $3.80/b so far in November, but was valued at a seven-month low of around +$2.60/b on Tuesday, which is likely to be the effective floor for Al Shaheen.  

Traders said demand for spot January cargoes has been sluggish so far this month, with anticipated demand from Chinese refineries yet to materialize for Middle East barrels, in part due to competition from discounted Russian cargoes.

Al Shaheen is also seen as a guide for Saudi Aramco's flagship Arab Light OSP, which traders said is likely to be reduced in January from the current Platts Dubai/DME Oman +$5.45/b for loading next month.

The state-owned energy giant also issued tenders for one cargo each of Qatar Land and Marine grades.