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Spot Crude Premiums Increase on Strong Demand from Rising Margins

OIL

Crude demand has driven up the spot premiums traders pay for cargoes as refining margins have increased in recent weeks according to Bloomberg. Refiners are looking at alternatives due to Saudi production cuts and after recent disruptions to output from Nigeria and Kazakhstan.

  • The differentials for spot cargoes from the Middle East have surged in the past several days amid strong buying from China.
  • Chinese refiner Rongsheng secured millions of spot barrels last week in addition to China’s 40% more crude from the Saudis month-on-month for September loading. Buyers across Asia have also already this month bought about 40mbbls of US crude for November delivery after strong buying last month.
  • Abu Dhabi’s Murban crude premium to Dubai increased to nearly 3$/bbl on Monday, an increase of about 0.3$/bbl from the start of the month according to Bloomberg.
  • Demand may reduce in coming months with the upcoming US refinery turnaround season and with the restart of oil sands production in Canada following summer maintenance.

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