OPEC+ supply cuts lift global sour crude oil prices – EIA
OPEC+ supply cuts have limited global supply of medium-sour and heavy-sour crude oils and increased their prices against sweet crude oils, the US Energy Information Administration (EIA) said.
PHOTO: A pumpjack in front of the OPEC flag. Getty Images
Voluntary production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies have "particularly limited sour crude oil grades and put more upward price pressure on sour barrels than sweet,” the US-based energy agency said in a recent report. It classifies crude oil as sour if it contains more than 1% of sulphur.
OPEC+ recently announced crude oil production cuts that will be in place until next year. The global oil producer group’s de-facto leader, Saudi Arabia, aims to bring “balance in the [oil] market”.
As a result of these voluntary reductions, the medium-sour grade crude oil grade Dubai Fateh recently traded at a premium to light-sweet Dated Brent, the EIA pointed out.
Between January 2021 and June 2023, Dated Brent traded at an average premium of $2.56/bbl over Dubai Fateh. However, “the roles reversed” between 21 June and 19 September 2023, the EIA estimated, with Dubai Fateh trading at an "average premium of $0.48/bbl compared with Dated Brent.”
A medium-sour grade of crude oil from Norway's Johan Sverdrup field showed “similar movement in the price” in 2023, “as refiners offer increased prices to attract constrained supply,” EIA added in the report.
Across both Asia and Europe, prices for medium-sour crude oils have pushed higher this year after Saudi Arabia increased the official selling price (OSP) of Arab Light, a medium-sour grade. This has further "narrowed" sweet and sour crude oil price spreads in “major trading hubs including those in North America, Europe and the Middle East,” the EIA estimated.
In the US, the price spread between medium-sour Mars crude oil and light-sweet Magellan East Houston (MEH) has narrowed since late 2022, EIA said.
“The current market dynamics, with sour crude oil prices trading unusually high, remain uncertain against a backdrop of production cuts, higher OSPs, and heightened demand for sour crude oil as several new Middle East refineries come online,” EIA further noted.
Separately, in its flagship monthly short-term energy outlook report, the EIA estimated that OPEC crude oil production averaged 27 million b/d in August, the lowest since August 2021.
“Crude oil production in Saudi Arabia averaged 8.7 million b/d, the lowest since May 2021,” the energy watchdog noted.
By Aparupa Mazumder
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