Crude spreads 1/2022

Crude spreads

The premium of light sweet to medium sour crudes recorded different trends in December in key markets. Sweet/sour differentials in Europe and the USGC narrowed as outright prices from light sweet Brent fell markedly compared with sour grades, despite the positive performance of light distillate margins. In Asia, the spread widened on strong demand for light sweet crude amid robust margins for low sulphur fuel oil and high desulphurization costs.

In Europe, the Urals sour grade stand at discount level in December against light sweet benchmark North Sea Dated, although the discount narrowed by 34¢ to 95¢/b on average in December. The Urals crude value was supported in the first half of December by healthy European demand for the grade, lower loading volumes in Northwest Europe and lower availability of similar foreign grades. However, the discount of Urals to North Sea Dated deepened in the second half of December. Meanwhile, the value of light sweet crude in the North Sea weakened on soft demand for January loading cargoes. The Urals crude oil differential to Dated also rose in Northwest Europe and the Mediterranean by 36¢ and 16¢ on average m-o-m, respectively, to stand at a discount of 94¢/b and $1.31/b.

In the USGC, the LLS premium over medium sour Mars also narrowed in December, despite a decision to release mainly medium sour crude from the SPR. The LLS-Mars crude spread narrowed by $1.13 to average a premium of $2.57/b after widening significantly in October and November to above $4/b on a daily basis. This is partly because Mars sour crude was supported by similar strengthening sour crudes in other regions and strengthening high sulphur fuel oil margins. Meanwhile, gasoline margins weakened and the gasoline-diesel spread declined.

The narrowing spread between North Sea Dated and WTI in the USGC probably added downward pressure to light sweet grades in the region.

In Asia, the value of sweet/sour crude differentials widened again in December, with the Tapis premium over Dubai rose on a monthly average by 55¢ in December to reach $5.63/b, as light sweet crude value in the Asia Pacific region was supported by robust regional demand and strong demand for low sulphur fuel oil. This is despite better west-to-east arbitrage economics and higher demand from the Atlantic Basin. The Brent/Dubai exchange of futures for swaps narrowed by $1.64 on a monthly average in December to stand at $2.94/b, the lowest monthly average since March 2021.