Nearly 3 million barrels of Abu Dhabi's Murban crude is expected to move into the Mediterranean in June, according to traders, as weaker demand in Asia and expectations of a bullish summer in the Mediterranean Urals market have attracted Persian Gulf barrels into the west.
"For ADNOC, an overhang of barrels [for June loading] have moved to the west," a crude trader said, adding that as much as 3 million barrels of Murban could move that way in June.
Murban is a light, sweet crude with an API of 40.2 degrees and a sulfur content of 0.79% that loads out of the Jebel Dhanna and Fujairah ports in Abu Dhabi on the Persian Gulf. It primarily moves east.
However, traders said that expanding Murban production, coupled with seasonal refinery maintenance in Asia and generally weak end-user demand, has prompted sellers to seek out other markets for June cargoes.
In the Mediterranean, where local crude supply has been constrained by sanctions against Iran and Syria, ongoing unrest in Libya and, most recently, a complete halt in exports of Iraq's Kirkuk crude, traders have increasingly looked outside of the region to meet demand needs.
Heavy sour Latin American grades like Colombia's Vasconia and Castilla grades, heavy Basrah from Iraq's Persian Gulf, and even exports from Mexico and Canada have started to find their way into the Mediterranean crude supply stream this year.
European crude traders said that expectations of a strong summer for Mediterranean grades like Russia's Urals and Azerbaijan's Azeri Light -- expectations that have so-far remained largely unrealized -- prompted some sellers to increase arbitrage flows into the Mediterranean.
"Everyone was expecting the summer to be strong on Urals like it was last year, so everyone came in and brought [outside crudes]," a trader said, adding that lower official selling prices out of the Persian Gulf in June have made the grades increasingly attractive.
"One more point that maybe people aren't seeing is that the Saudi OSPs are getting more competitive than they were before."
Market sources said that OSPs across the Persian Gulf have grown increasingly competitive.
A widening differential between the Brent/Dubai Exchange of Futures for Swaps [EFS] -- a paper mechanism that enables holders of ICE Brent futures to exchange their Brent position for a forward-month Dubai position -- has also been widening. Market sources said that crude pricing against Dated Brent has become increasingly less attractive, which has prompted some European refiners to take a closer look at crude grades that price against Dubai.
"[Sentiment] is bearish... I would think the hope of moving barrels East is dead due to the low Middle Eastern OSPs and I think IOC looking to July [already] confirms that... NWE margins are poor," said a trader of West African crude.