[Oman-L] Omani crude sold above Brent crude prices - any explanation?

[Joachim Duester]

Does anyone have an explanation for this?
Or is it that there just happens to be a demand from refineries that process exactly the type of crude (with regard to sulphur content) which Oman supplies? Comments welcome!



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Middle East crude under pressure as Oman gains   
Source: Khaleej Times, 26 July 2008

The Middle East crude market came under pressure yesterday as front-month Oman crude, which usually trades lower than Brent crude due to its weaker quality, was pushed well above its market value, traders said.

September-lifting Oman crude traded $ 3.11 a barrel higher than Brent crude for the same month by 0830GMT, and almost $ 4 higher than US crude futures.

September Oman settled at $ 129.41 by 0830GMT on the Dubai Mercantile Exchange, up $ 5.19 cents from Thursday.

"The lack of liquidity is the biggest concern," said a trader with a refiner. "This should not be happening. Just think of the (official selling price)."

The Oman OSP is the arithmetic average of the daily Oman settlements at 0830GMT in April for the front-month contract and will probably rise to another record high.

"Oman is all over the place," said another trader. "Someone is really playing a game."

Oman crude usually trades well below US crude and Brent crude, and only about $ 1 above Dubai values because it has a higher sulphur content than the first two, but about half that of Dubai crude.

The spread between September-lifting Oman crude and October-lifting rose to above $ 7 a barrel, turning Oman into backwardation and making prompt Oman crude more expensive than crude for later months.

DME Oman prices have come off highs in recent sessions but have not lost as much value as other benchmarks.

The spread between September Oman DME and Dubai swaps at Asian closing widened to around $ 5.80 a barrel yesterday, up from an already high level around $ 2.20 a barrel on Thursday, Reuters calculations showed.

Other spot cargoes came under pressure as ample supplies were still left on the market, with most buyers' demand covered for the month, traders said.

A number of spot cargoes of Abu Dhabi's flagship Murban crude were still on the spot market, with a Japanese trading house offering some cargoes with destination restrictions within Japan, further pressuring differentials.

An enduser pegged Murban - without destination clauses - at around parity to a five cents premium to ADNOC, down about 5 cents from earlier in the week.

No Qatar Land was offered on the spot market this month as sellers had committed all volumes to term buyers, traders said.

The Brent/Dubai Exchange of Futures for Swaps for September (EFS) rose to around $ 3.60 a barrel, up 40 cents from Thursday, a broker said. But the arbitrage remained shut due to high freight prices.

September ICE Brent was $ 1.77 higher than a day ago at $ 126.90 a barrel at 0830GMT, as oil prices found some stability after two weeks of losses as buyers crept back into the market before the weekend.