The Dubai crude oil benchmark was set Wednesday by a rare nomination of a Murban cargo via the Platts partials price-discovery process following a rare nomination of a Murban cargo on convergence, reports QCIntel.
Sources said that China’s Unipec declared the light sweet grade to Totsa, the trading arm of TotalEnergies, on convergence following the transaction of 20 partials, each of 25,000 barrels.
‘Dubai basket’ grades
After reaching 500,000 barrels between two counterparties, the seller can declare one of the ‘Dubai basket’ grades, namely Dubai, Oman, Upper Zakum, Al Shaheen and Murban, while the buyer is obliged to accept the nomination.
In practice, this will be the least-valuable grade, which for most of this year has been Upper Zakum. However, Oman and Al Shaheen have also regularly featured on nomination as similarly priced grades to Upper Zakum.
However, Murban can occasionally feature as the convergence grade once the Quality Premium (QP) is factored in, which acts as a ‘rebate’ for the seller when nominating the superior-quality grade.
Front-month cash assessments
Platts sets the QP at 60% of the net price difference between its front-month cash Murban assessment and Platts front-month cash Oman assessment during the full month prior to the announcement.
For February delivery, the QP was set by Platts at $2.8271/b based on a January-delivery spread between Oman and Murban of over $4.50/b. But this month, the spread between light crudes and medium sour has narrowed sharply. This was the first Murban nomination since August, which was the first since 2020.
Quantum set the Murban-Dubai spread at $2.72/b on Wednesday, a level at which nominating Murban to settle a physical Dubai short becomes attractive.
Platts amendment
In November, Platts proposed an amendment to the methodology used to calculate the QP applicable to delivery of Murban upon physical convergence of Dubai, Upper Zakum, Oman, or Al Shaheen crude partials in the Platts MOC assessment process.
From 1 February, the Murban QP will be calculated as 50% of the observed price difference between Platts Murban and Platts Oman 15 business days prior to the day of publication.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: QCIntel
Your point of view caught my eye and was very interesting. Thanks. I have a question for you.