BTC Blend crude has once again traded at historically narrow premiums to the North Sea Dated benchmark, as sellers struggle to move surplus cargoes outside the region.
Early-July loading BTC Blend changed hands at $1.00-1.15/bl to the benchmark — down by more than $1/bl from a month earlier, although levels have since rebounded somewhat. Nonetheless, BTC Blend values remain under pressure as a closed window for arbitrage shipments east confines surplus Azeri exports to the Mediterranean region.
BTC Blend premiums enjoyed support for much of June trade, as supply of competing west African crudes was crimped by disruptions to key Nigerian export grades. June cargoes traded at premiums as high as $2.25/bl to Dated, before correcting downward sharply as an overhang of late-June supply threatened to build up with shipments to destinations outside of the region coming to an end.
The economics of shipping light sweet regional crudes east began to steadily erode in June, against a backdrop of worsening gasoline and naphtha margins in Asia-Pacific. Gasoline'spremium in Asia-Pacific to Ice Brent crude fell to a near 16-month low on ample supplies and keen selling interest from Chinese and Taiwanese refiners.
Values for regional light sweet Asia-Pacific crudes — such as Malaysian Labuan — fell sharply in line with weaker products margins, and Azeri and Nigerian crude exports struggled to stay competitive. Labuan's discount to BTC Blend delivered to Singapore was as wide as $2.30/bl a few weeks ago, before BTC Blend values collapsed. The Malaysian grade frequently trades at a premium to delivered BTC Blend.
But BTC Blend premiums may have a found a floor, with July exports pencilled in at a relatively tight 665,000 b/d — down by around 6pc from June. Shipments east will be limited to term barrels in July — Indonesia's Pertamina takes a handful of cargoes a month and Indian state-controlled IOC may also have a term relationship with Socar.
On average, up to a fifth of BTC Blend supplies head to Asia-Pacific refiners each month, or around 130,000 b/d. Indonesia, Thailand and India remain the grade's top Asian destinations, although Chinese refiners in Taiwan and on the mainland are emerging as regular buyers as well. Taiwan's CPC alone has taken 52,000 b/d this year to date, while China's Unipec is set to lift its second 270,000t shipment this year in July.
