SINGAPORE: December differentials for DME Oman and Dubai slumped into discounts in the Middle East crude market on Monday despite continued buying by Chinaoil on the Platts window.
"Chinaoil didn't appear on the bid side, it only came out to lift the offers," a trader with a Western firm said.
"So the sellers offered it down."
Shell and Gunvor will deliver an Upper Zakum cargo each to Chinaoil while Unipec sold an Oman cargo following Monday's trade.
The market softened just as a production halt at an oilfield run jointly by Saudi Arabia and Kuwait is expected to curb crude supply to Asian buyers - mainly Japanese and South Korean refiners - likely forcing them to turn to the Middle East spot market, traders said.
Buyers may procure similar crude as replacement, which could strengthen spot differentials for grades such as Banoco Arab Medium. Last week, at least two cargoes of Banoco Arab Medium for December loading traded at 5 cents discount to parity to its official selling price (OSP), traders said.
Saudi Arabia and Kuwait have temporarily stopped production from the Khafji oilfield, which produces 280,000-300,000 barrels per day of crude, to comply with environmental rules.
Separately, Iraq's State Oil Marketing Organization (SOMO) has proposed splitting its Basra Light crude supply into two grades and has requested feedback from buyers in Asia, trade sources said.
The second largest OPEC producer plans to offer two grades of crude - light and heavy - for exports from its southern terminals, the sources said, citing an e-mail from SOMO.
The heavier grade with an API gravity of 24-25 degrees will be loaded from its Single Point Mooring (SPM) terminals, while the light grade will have an API gravity of 29 degrees, one source said. SOMO will set monthly official selling prices (OSPs) for each grade, he said. Buyers are to respond by the end of the week, the source said.
DME OMAN
DME Oman for December settled at $84.18, down 95 cents, at 0830 GMT. This puts DME Oman at 6 cents a barrel below Dubai swaps against a premium of $1.13 in the previous session.
MARKET NEWS
A self-styled rival government controlling Libya's capital announced its own oil policies this week, drawing a rebuttal from Prime Minister Abdullah al-Thinni who said oil revenues continued to go to the elected government.
Saudi crude exports fell in August for the fourth month in a row to their lowest levels in three years, while volumes used by local refineries rose to a record high, official data showed.
A "limited fire" broke out on a subsidiary oil pipeline in eastern Saudi Arabia on Saturday after assailants fired shots at a security patrol, the state news agency SPA said.
Top Chinese refiner Sinopec Corp is expected to process 4.3 percent more crude oil in 2015 versus this year at about 4.9 million barrels per day (bpd), industry consultancy ICIS C1 Energy reported.
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