Crude
Market Overview
Houthi threats on Saudi Red Sea cargo are forcing Asian buyers to adjust:
Either seeking alternative supplies
Or by taking cargo around the Cape of Good Hope
The latter adds around an extra month in voyage duration.
It also means Yanbu cargoes would load on a Suezmax, or load from a VLCC at the Mediterranean end of the SUMED pipeline (Sidi Kerir)
In both cases, Saudi Red Sea crude could become more viable for European/Med buyers – especially if CPC Blend stays off the market.
In short, watch out for pressure on FOB Arab Light in the Med and/or quick, short-lived declines in Med landed values.
FOB premiums for CPC Blend crude have surged on news that CPC consortium is no longer accepting Kazakh crude.
This means the grade is now much less attractive to Far East refiners, even at a time where Saudi Red Sea and Middle East Gulf supplies are fraught with risk.
Instead, Far East refiners will seek cheaper rival Atlantic Basin crudes, e.g. North Sea, WAF and WTI – the latter currently posting the lowest landed value.
Hesitancy from Asian buyers for Saudi Red Sea crude (i.e. Arab Light from Yanbu) will naturally drive enquires for replacements.
Mars is one such (non-AG) replacement – it is somewhat similar in crude quality and can also be exported on a VLCC out of USGC.
As a rough comparison, the relative discount for Arab Light (from Ras Tanura) landed in Far East vs Mars is around $5/bbl.
But after accounting for higher anticipated costs for a Yanbu load (freight, insurance, WRP, etc.) and the steeper crude backwardation (latter delivery), Mars isn't as expensive as initially thought, at least on a Far East landed basis
Asian buyers may seek Mars either as a USGC coload with WTI, or as a full cargo; however, that cargo would not reach Asia before October.
