Spot differentials for Middle East crude loading in April fell to multi-month lows on Wednesday, in response to a drop in demand from Asia during the peak refinery maintenance season in the second quarter. Sellers were also adding to the pressure on prices by trying to offload as much supplies as possible before the start of Lunar New Year holidays.
A potential rise in arbitrage supplies also weighed on the Middle East crude market. The impact was felt across all crude grades with light grades flipping into discounts while discounts for medium grades widened.
"It's time to make bigger price adjustments," a buyer said, referring to months of price hikes from Gulf producers. BP offered an April-loading cargo of Murban crude at 5 cents below its OSP on RIM, down from a 5-cent premium a day earlier, but there was no buyer.
Japanese refiner Fuji Oil bought three Middle East crude cargoes loading in April at discounts, traders said. The company bought one Upper Zakum cargo at 15-19 cents below its OSP and two Qatar Land cargoes at discounts of 20-23 cents a barrel to its OSP, they said.
Taiwanese refiner Formosa Petrochemical bought 1 million barrels of Oman crude to load in April via a tender, traders said. The crude was purchased at 50 cents a barrel above Dubai quotes, they said. Spot premiums for Oman crude loading in April are at their lowest in three months.
Cash Dubai's premium to swaps rose to 16 cents a barrel on Wednesday, after hitting the lowest in more than four months. Koch bought a partial from Reliance at $59.36 a barrel in the only trade on Wednesday.
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