Middle East Crude-Benchmarks down; spot cargoes trade in discounts

SINGAPORE: Middle East crude benchmarks dropped for a second session on Tuesday, while spot trades remained mired in discounts on ample supplies and lower demand from Japan.

The market has unexpectedly weakened this month for cargoes loading in December, with most grades ranging from light-sour Murban from Abu Dhabi to Qatar's Land and Marine crude trading at discounts to their respective price markers.

"Refiners (last month) asked for a lot of Saudi incremental oil," said a trader with a North Asian refiner, helping explain why there has been so much Saudi supply this month.

"There is ample supply of light sour crude - Arab Extra Light, ADNOC grades and (Kazakhstan's) CPC Blend," said a second trader with a North Asian refiner.

The arbitrage for crude produced in the Atlantic Basin and the United States to Asia has also opened after Brent's premium to Dubai swaps narrowed and as grades such as CPC Blend trade at deep discounts, traders said.

Despite the supply, Asia's actual spot demand was lower than expected, the first trader said, because of a lower appetite from Japanese refiners after operations at their plants were hit by typhoons and an earthquake in September and October.

"Our utilisation rate is not so high currently, so our spot purchases are at a minimum quantity," said a Japanese oil buyer.

WINDOW: Cash Dubai's premium to swaps edged down 2 cents to $1.07 a barrel. Shell will receive an Upper Zakum cargo from Lukoil, the 11th cargo to be delivered to the oil major on window this month.