By Florence Tan
SINGAPORE- Asian refiners are snapping up Middle East light crude oil cargoes as high Brent prices curb arbitrage supply from the U.S., Europe and Africa, driving up the Murban benchmark to its highest this month, traders said on Friday.
Refiners from South Korea and Japan have purchased spot Abu Dhabi light grades – Murban, Das and Umm Lulu – for October loading in the past two weeks while Indian Oil Corp the country’s top refiner, bought 3 million barrels of Murban via a tender this week, they said.
The purchases boosted benchmark IFAD Murban crude futures, with the premium for October contract rising 23 cents to $1.41 a barrel at Thursday’s close, the highest level this month, Reuters data showed.
These purchases are replacing WTI crude from the United States, which has become costly, they said.
Offers for US West Texas Intermediate Midland (WTI) crude to Asia were at $5-$6 a barrel above Dubai quotes for November delivery, holding strong for a second straight month and curbing light sweet crude supply to the East, traders said.
Similarly, European and West African crude have also become more expensive than Middle East supply after Brent crude’s premium to Dubai quotes touched a 10-month high earlier this week, they added.
Traders attributed the strength in WTI and Brent to stronger backwardation in their market structures while inventory levels at Cushing, Oklahoma, the delivery point for WTI futures, had fallen.
Backwardation refers to higher prompt prices than those in future months indicating tight supply.
