Crude markets in Asia-Pacific started the year with a flurry of activity as market participants tried to proactively stay ahead of the geopolitical uncertainty that was expected to result from the changing of the guard at the White House.
The outgoing Biden administration dished out sanctions for dozens of tankers in order to reduce the flow of Russian crude and refined products, pushing benchmark Dubai’s cash differential to multi-year highs above US$5/b on 17th January 2025. The sanctions came amid a four-months buying spree between October and January on the Dubai market, as some traders anticipated further US pressure on Russian supplies before the new US president was sworn in.
The addition of 183 vessels to the sanctions list, aimed at curbing Russian crude exports, largely made up of medium sour crude, came at a time when the market for similar quality crude had been tight on the back of ongoing OPEC+ cuts.
The US sanctions scrambled Chinese and Indian buyers to seek prompt supplies for February and March delivery resulting in a slew convergence on the Singapore trading window.
In December, a total of 39 convergence were seen, with Upper Zakum and Oman making most of the deliveries. In January, a total of 26 convergence were seen, although this time along with the medium sour grades there was also the delivery of two light sour Murban cargoes, as diverging fundamentals for medium and light crude diminished the quality premium that the latter commands over the former. The last time Murban was delivered into the Singapore window was in September 2024.
Murban, a light sour grade which has been part of the Dubai basket since 2016, is rarely delivered into the Dubai basket, but its growing availability since late last year, along with consistent flows of light WTI Midland crude has been in contrast with the bullish fundamentals in the medium sour market.
WTI cargoes into Thailand were up by nearly 36,000 b/d to 110,000 b/d in January, latest data from analytics firm Vortexa shows. Similarly, WTI cargoes into China rose by 66,500 b/d.
Plentiful supplies of light crude have resulted in the quality premium for Murban staying at zero for all of last year and this year so far. Murban values has been at a discount to GME Oman for most of February, further illustrating how crude values in Asia are being shaped by contrasting supply dynamics.
