Medium sour Oman crude’s premium to Dubai has narrowed sharply in the
September Asian sour crude trading cycle and the spread could remain tight as
Chinese demand is expected to slow amid dwindling refinery run rates, market
participants said Friday.

S&P Global Platts assessed the front-month September cash Oman crude at
parity to cash Dubai Thursday and the spread between the two medium sour
Middle Eastern benchmark grades averaged 4 cents/b so far this month.

The narrow spread so far in July marks Oman crude’s lowest monthly
average premium to Dubai for the year. Oman crude premium averaged 12 cents/b
and 11 cents/b in June and May respectively, while it commanded a monthly
average premium of 51 cents/b in April.

Regional traders noted that Oman crude could fall under pressure from the
recent slowdown in Chinese refinery run rates as the medium sour grade is
heavily dependent on demand from Asia’s top oil consumer.

“[The value of] Oman crude is very much China demand driven,” said a
Singapore-based sour crude trader, when asked about the possible reason behind
Oman’s narrow premium in recent weeks.

Market sources indicated that China is recently struggling to deal with
high oil product inventories amid tepid domestic sales and limited exports and
this could further lead to lower refinery run rates around the country.

“[June oil product] exports were limited by a shortfall in export quotas,
despite a serious surplus in the domestic market for gasoline and gasoil which
has caused a rare price war in eastern and southern China,” said a
Beijing-based trader with a state-owned company.

“They [Chinese refiners] cannot dispose [their excess] products [fast
enough],” the Singapore-based trader said.

In the spot market, trading activity for September-loading Oman crude has
yet to pick up but several Dubai crude cargoes changed hands in recent weeks.

Latest market talk indicated that GS Caltex, Chevron and JXTG Nippon Oil
& Energy could have bought a cargo each of Dubai crude for loading in
September at discounts ranging between 30 cents/b and 38 cents/b to Platts
front-month Dubai crude assessments.

The cargoes may have been sold by Phillips 66, Chinaoil and Occidental,
trade sources said.

–Gawoon Philip Vahn, philip.vahn@spglobal.com
–Ada Taib, ada.taib@spglobal.com
–Edited by Irene Tang, irene.tang@spglobal.c

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