Qatar Al Shaheen premiums in sharp retreat as Dubai spreads crunch

18 Aug 2022

Quantum Commodity Intelligence - QatarEnergy has awarded its monthly Al Shaheen tender for October at sharply lower levels from the previous month, reflecting the broader weakness in Asian oil markets.

The state-owned firm was heard to have awarded two or three cargoes of the medium sour grade at premiums of just above $4/b to the underlying October Dubai swap.

This compares to last month when the grade went at +$9-10/b over the Dubai September swaps, the second highest premiums on record.

The highest ever premiums were in March when May-loading cargoes were awarded at around Dubai swaps +$12/b, coinciding with Russia's invasion of Ukraine and record Dubai backwardation at the time.

The lower premiums are largely a function of the market structure, as Al Shaheen prices during the month of loading, so it includes two months of backwardation – hence during the loading month of October, December is the trading month for Dubai.

The key M1/M3 (Oct22/Dec22) spread, which regional producers closely monitor, was assessed by Quantum at just above +$4/b on Thursday, having averaged $9.19/b in July.

The Al Shaheen tender is closely watched as it acts as a price indicator for the Middle East medium-sour crude market and is also a component of the Dubai' basket' of crudes, often setting the price of Dubai as the lowest of the five deliverable grades into the pricing mechanism.

The tender award puts Al Shaheen near parity with Upper Zakum, which had been setting the Dubai assessment this month as the lowest of the five grades.

It is also seen as a guide for Saudi Aramco's flagship Arab Light OSP, which is in line for a steep reduction versus the record September OSP.

Meanwhile, the Qatar Marine tender for October was heard awarded at Dubai swaps +$4-$4.20/b and Qatar Land at just below Dubai swaps +$4/b.