ADNOC's July OSPs for Umm Lulu, Das viewed higher than expected

Abu Dhabi National Oil Co. on June 2 issued its July official selling price differentials Das Blend and Umm Lulu that were higher than market expectations, traders told S&P Global Commodity Insights June 3.

ADNOC raised the differential for its light sour Umm Lulu crude by 5 cents/b month on month to 5 cents/b over Murban OSP while leaving Das Blend differential unchanged at minus 60 cents/b. ADNOC widened the discount for Upper Zakum by 10 cents/b to $2.20/b below Murban OSP.

July Murban crude OSP was set at $109.69/b, in line with the monthly average of IFAD Murban Singapore minute marker, equivalent to a premium of 7.43/b to July Dubai crude futures.

The Umm Lulu OSP was equivalent to a premium of $7.48/b to July Dubai futures while Das Blend OSP was equivalent to a premium of $6.83/b.

"I think it's expected [for Upper Zakum, but] Umm Lulu premium, this is interesting," a trader in Singapore said.

Traders expected OSP differentials for both Umm Lulu and Das Blend to weaken against Murban to factor in traded levels for these grades in May.

Last month, for July-loading cargoes, Umm Lulu was heard traded at a discount of around 10-15 cents/b to the IFAD Murban price while Das Blend cargoes were heard trading lower than 60 cents/b below Murban, sources said.

"It [OSPs] looks reasonable, but feel Murban/Das differential should be wider than 60 cents/b," a Japanese refinery source said.

Some traders suggest that ADNOC may have avoided discounting its light sour crudes too much amid rising demand for the grades in Asia as well as the West and record high cracking margins for light and middle distillates.

"Probably they take cracks into account," the trader in Singapore said.

Asia gasoline crack spread to Dubai crude averaged $27.83/b in May while those for gasoil averaged $36.52/b over the same period, data showed.

Prices for products such as gasoline and gasoil have surged in recent weeks on a recovery in global demand and sanctions on Russia that have taken a large chunk of crude and product supply out of circulation, sources said.

Additionally, alternative barrels from the West have also been increasingly hard to buy amid skewed economics, a second trader in Singapore said.

"I think in Murban they definitely see there is an opportunity to capture more value due to high WTI prices," the second trader said.

Meanwhile, the Upper Zakum differential was deemed acceptable with no surprises on that front, sources said.

Medium sour Russian Urals, an alternative to similar Middle East grades such as Oman and Upper Zakum, could still be flowing to some Asian buyers allured by the sharp discounts, sources said.

"On UZ [Upper Zakum] not much change but might be less appetite from China and India since they compete in this grade with Russian [barrels]," the second trader in Singapore added.