SINGAPORE: Middle East crude benchmarks, Dubai and Oman, extended gains on Tuesday with their premiums touching fresh highs this month.
Market sentiment is bullish on the back of OPEC and Russia output cuts, US sanctions on Iran and Venezuela and a conflict in Libya that could disrupt supplies.
Demand has also been rising as Chinese independent refiners sought more crude to use up the rest of their import quota while Asian refiners are set to ramp up output after a maintenance season.
ASIA-PACIFIC CRUDE: Prices for Australian heavy-sweet crude grades are rising as traders snap up cargoes for blending ahead of new rules on shipping fuel, putting them among the most expensive crudes in the world.
The high premiums are benefiting producers such as BHP Group, Santos Ltd and Inpex Corp, which sell grades such as Pyrenees and Van Gogh produced offshore western Australia.
The two grades have been sold at premiums of more than $7 a barrel to dated Brent, up more than $1 from the previous month, after Shell and Mitsui snapped up one May-loading cargo each, three trading sources said.
The high premiums reflect the blending value of the low-sulphur crudes for mixing with higher sulphur residue fuel onboard ships or in storage tanks to create low-sulphur fuel oil (LSFO), the sources said.
Chinese and Indian refiners who typically buy these Australian heavy-sweet grades have stayed on the sidelines after premiums for these grades jumped, they said.
"People are putting it into their system for IMO. If you're trying to set up with supplies to be ready to rock and roll, this is the right time to do it," said a second source, a crude oil trader who handles such grades.
Among different crude grades, heavy-sweet oil is the most suitable to be used for ship engines as it has a higher flash point, he added. Crudes with a low flash point ignite easily and can cause engine issues.
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