Crude
Market Overview
Johan Sverdrup, a key medium sour grade, for NWE refiners has becoming increasingly cheap and suggests ample crude supply in the region.
On the products side, strong diesel margins should be supporting demand from refiners, but supply looks like the bigger bearish factor.
An explanation for this is rising volumes of Saudi crude (Arab Light) located closer to the European market.
Saudi crude availability in the Med will have been boosted by a sharp increase of Yanbu crude exports to the SUMED pipeline (Ain Sukhna to Sidi Kerir) this month, in response to Houthi threats on Saudi Red Sea trade
News reports show at least three European buyers will be given full allocations for September.
CPC landed values into the Med – the main target market for the grade – have recovered back down to more normal levels seen in early July and look cheap given still present risks to export volumes.
Exports have been hampered in recent weeks due to Black Sea drone strikes, forcing refiners to reach further afield. Maintenance work is also scheduled during the month which could exports to slip, as could adverse weather.
If CPC exports are constrained again, Med refiners will be in a tricky spot as alternative light-sweet grades (WTI, WAF) are becoming more attractive to Asian buyers seeking more diversification from AG baseload, even at higher cost.
