Soaring European cracks propel Mediterranean, West African distillate-rich crude oil grades

Strong European distillate cracks amid a closed product arbitrage have supported certain sweet crude oil grades in the Mediterranean and West African markets to reach three-year highs to Dated Brent.

Most available cargoes of Azeri Light have been cleared up to the third decade of December, sources said.

"People are looking for gasoil-rich barrels on the sweet side," a crude trader said.

Russia's Siberian Light was seeing a similar high, assessed at a premium of 80 cents/b versus the Mediterranean Dated Strip Thursday, its highest level since August 2015.

Looking further afield, strengthening distillate cracks across the December-loading trade cycle also helped cargoes of Nigerian grades Forcados, Bonga and Erha clear despite strong freight rates putting pressure on arbitrage opportunities for Nigerian crudes to Europe, sources said.

In the December trading stem, distillate rich grades saw their price differentials rise in comparison to the naphtha- and gasoline-rich grades such as Bonny Light and Qua Iboe.

On Thursday, Platts assessed Forcados at Dated Brent plus $1.35/b, a 30 cents rise from the start of the trading cycle. The spread between distillate-rich and naphtha-rich grades widened over the month, with the gap between Qua Iboe and Forcados assessed at minus 25 cents/b Thursday -- the widest spread since June 2015.

TIGHT DIESEL

The diesel complex has been particularly tight over the last few weeks, with very limited prompt availability of barges and cargoes of ultra-low sulfur diesel in Northwest Europe and the Mediterranean.

This is due to a previously closed arbitrage from the US and the East of Suez region, lower exports from the Black Sea and the Baltic earlier this month and higher cargo demand into Germany to offset the loss of flows from the Amsterdam-Rotterdam-Antwerp hub to Germany and Switzerland via the Rhine, which remained very shallow impeding transportation of barrels by barge.

"The market is very tight...There is nothing available prompt in ARA," a trader said.

According to another trader, increased arbitrage supply from the Middle East and west coast of India won't arrive until the end of the first decade of December. "I don't think there is any real oil on the front, there are very few available cargoes...There are a lot of places running on very low stocks," he said.

source: S & P Global Platts