SINGAPORE: DME Oman crude jumped to its strongest differential against Dubai swaps since August on Monday, partly due to robust demand from South Korea and a potential arbitrage flow to the US Gulf Coast on a wide WTI-Brent spread, traders said.
DME Oman's discount to Dubai swaps narrowed close to $1 to $0.39 a barrel during the close of Asia market, after swinging in a wide range to as high as a premium of more than 30 cents, traders said. Oman's value weakened after market close.
There is "a lot of buying in Oman, in Korea especially," one trader said. "Maybe the US arbitrage too."
Prior to the price jump, Formosa Petrochemical bought one Oman cargo at about $1.20 below Dubai quotes on Friday.
After the close of Asia markets, Oman's oil minister said his country was ready to cut oil output by between 5 and 10 percent to prop up prices and other producers should do the same.
Asian refiners are also keeping an eye on Iranian oil exports after world powers lifted sanctions on the OPEC producer on Saturday.
Despite the lifting of sanctions, Japanese buyers of Iranian crude will have to keep using special sovereign shipping insurance to import oil for the foreseeable future, industry and government sources said on Monday.
Iran is first expected to reclaim lost market share in Europe, where it exported 800,000 barrels per day (bpd) of its crude in 2011, but further market share gains in India and China will be more difficult, Barclays analysts said in a note.
"One thing that remains uncertain is how willing Iran will be to discount its oil further to gain footholds in new markets in the next several months," the bank said.
PRICES
DME Oman futures for March settled at $24.85, down $1.11, at 0830 GMT. This put DME Oman at $0.39 a barrel below Dubai swaps, up from a discount of $1.32 in the previous session.
Chinaoil bought six Dubai partials from Shell, Unipec and Reliance during the Platts MoC process, traders said. Cash Dubai's discount to swap narrowed by 6 cents to $1.51 a barrel.
MARKET NEWS
An end to sanctions on Iran has driven global crude futures to 12-year lows and brought sub-$20-a-barrel oil in sight, although for some producers that is already a painful reality.
Saudi Arabia's crude oil exports in November rose to 7.719 million barrels per day from 7.364 million bpd in October, official data showed on Monday.
Free of international sanctions, unfettered Iranian oil exports might be expected to drive prices further below $30 a barrel. But market participants say the removal of trade restrictions was so well trailed that price moves on Monday should be limited.
Iran's emergence from economic sanctions will help Europe to diversify its energy supplies, but the Islamic Republic will need to invest at least $150 billion in infrastructure to become a major producer, the head of Italy's Eni said on Sunday.
ChemChina has agreed to buy a stake in Swiss energy trader Mercuria, the companies said on Monday, cementing its role as one of China's most acquisitive firms as its expands in new areas and as Beijing opens its oil markets for more imports.
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