LONDON: North Sea crude differentials edged lower on Thursday, in a day of sluggish trade, although low availability of prompt-loading barrels propped up the front end of the derivatives curve, traders said.
Traders said any player holding physical barrels seems reluctant to release them into the market, particularly as North Sea supply is set to fall in June, due to maintenance at the Ekofisk oilfield.
This scarcity of crude oil for prompt loading has forced the weekly swaps curve into backwardation, leaving the first week at a premium of 12 cents to the second week, up from a discount of around 3 cents a week ago.
Supply of the four grades that underpin the dated Brent benchmark will rise in July from June, but only thanks to a recovery in production of Ekofisk crude as a result of maintenance work coming to and end.
Adding to lower supply from the North Sea is the two-week-old strike at refineries in France that has eroded crude demand and kept differentials for heavier, more sour grades such as Forties or Urals under pressure, and created a glut of light, sweet crudes that has slowed down trade in West Africa.
The price of oil is hovering close to its highest level this year, but more than any other region in the world, the North Sea has suffered greatly over the past two years as a 60 percent drop in oil prices, high operating costs, dwindling reserves and a tough tax regime has hit operators hard.
WINDOW SUMMARY
PetroIneos bid for a cargo of Forties for loading June 18-22 at a discount of 20 cents to dated Brent.
Unipec offered a cargo of Forties for loading June 14-16 at a premium of 10 cents to dated Brent.
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