Murban crude prices drop as OPEC+ raises output, prompting surge in volumes to Asia
SINGAPORE, May 23 (Reuters) - Spot premiums for Murban crude have hit six-month lows on surging supply as the United Arab Emirates ramps up output following OPEC+'s decision to accelerate production hikes and compete head-on with U.S. shale oil, traders and analysts said.
Asian buyers are flocking to the flagship Abu Dhabi light grade on low prices, with a record 10 million barrels of Murban traded on the S&P Global Platts Market on Close (MoC) process this month. Cheap Murban crude is also squeezing U.S. West Texas Intermediate oil out of Asian markets.
"Asian markets have been oversupplied with light grades for most of this cycle, driven by outages at Japanese refiners, increased UAE availability this cycle following the accelerated OPEC+ unwind, and planned maintenance at Saudi Arabia's Petro Rabigh refinery," said Richard Jones, a crude oil analyst at Energy Aspects.
"Dubai had effectively become a light benchmark this cycle," he added.
Murban became the cheapest among a handful of medium-sour crude grades that can be delivered during the Platts MoC process that sets the Dubai benchmark price, market sources said, leading to record deliveries on the platform this month.
Price weakness in the grade that accounts for two-thirds of Abu Dhabi National Oil Co's (ADNOC.UL) production is weighing on the Middle East benchmark that prices more than 14 million barrels per day of exports to Asia.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, agreed to increase production by nearly 1 million barrels per day (bpd) in April, May and June, with UAE's production rising to 3.09 million bpd in June from 3.02 million bpd in May.
ADNOC expects Murban exports to exceed 1.7 million bpd in June through August, up from 1.65 million bpd in May, according to an April report on the ICE Futures Abu Dhabi (IFAD) website where Murban futures are traded. ADNOC declined to comment on Murban production and export volumes.
A source with knowledge of the production plan said Murban output will rise by 200,000 bpd to a record 2.1 million bpd in July.
IFAD Murban futures fell below $60 per barrel in early May for the first time since the contract started trading in 2021.
The average spot premium for July-loading Murban slipped to $1.19 per barrel this month, the lowest in six months, making Murban cheaper than heavier grades such as Qatar's al-Shaheen whose term price was set at a premium of $1.63 a barrel and Oman whose premium averaged $1.37 so far this month.
Heavier grades are typically cheaper than light ones as they produce more residue. The switch in pricing is partly driven by record fuel oil margins, said June Goh, senior analyst at Sparta Commodities.
A record 20 Murban cargoes have been delivered in the Platts MoC process so far this month, S&P Global said. PetroChina (601857.SS), opens new tab is the biggest buyer this month, with trading house Vitol (VITOLV.UL) delivering most of the cargoes, trade data showed.
Japan, Thailand, India and China are Asia's top Murban buyers.
Meanwhile, U.S. WTI is landing about $1 per barrel more expensive than Murban into Asia for August delivery, Sparta's Goh said, deterring Asian buyers from taking more U.S. light oil.
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