The Middle East crude market was weaker yesterday, with prices for physical cargoes of March-lifting Oman and Murban crude transacted at lower premiums over the previous month.
Demand in Asia for supplies is being depressed by high official selling prices for some grades and the prospect of more refinery capacity going into turnaround in the coming months.
The spring maintenance season will kick off in February, with about 1.2 million barrels per day (bpd) of capacity expected to go offline from next month as winter demand ebbs, according to Reuters data.
However, prices of the heavy sour Oman were supported by strong fuel oil cracks and as buyers consider it a possible replacement for Iranian crude.
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Meanwhile, Arcadia Petroleum Ltd bought a partial cargo of Dubai crude for March and Mercuria Energy Trading SA bought two as timespreads for the benchmark widened.
Arcadia bought one lot from South Korea's SK Innovation Co at $111.25 a barrel, and Mercuria paid $111.20 a barrel for one cargo each from SK and Royal Dutch Shell Plc, according to a survey of traders who monitor the Platts pricing window. With its sixth purchase this month, Arcadia has picked up 150,000 barrels for March delivery.
The backwardation, a pricing situation where the cost of early shipments is greater than for later deliveries, widened for the third time this week.