Spot premiums for Murban crude produced in the United Arab Emirates are hovering at their highest point in two months, supported by robust demand from Asian buyers to replace US supply as the arbitrage has closed, according to trade sources.
Indian refiners are also using Murban to substitute Russian oil, underpinning the price for Abu Dhabi's flagship light sour grade despite ample supply.
The spot premium for March-loading Murban stood at $2.38 per barrel to Dubai quotes on Tuesday, after touching $2.53 last Wednesday, its highest since early November, Reuters data showed.
Murban outperformed other medium-sour grades such as Qatar's al-Shaheen and Oman, which traded at discounts to the Dubai benchmark this month.
The price spread between US West Texas Intermediate (WTI) and Murban delivered into North Asia on a cost-and-freight basis has been firmly in positive territory since late December, suggesting that the arbitrage for WTI flows into Asia is closed, said Samuel Kong, a senior analyst at consultancy FGENexant.
"Asian buyers see less incentive to purchase long-haul light sweet grades amid a significantly wide Brent/Dubai spread and high freight rates," he added.
Brent crude oil's premium to Dubai has climbed since early December, hitting over $2 per barrel last Wednesday and the highest since July, as tensions in Iran and Venezuela supported the global benchmark, LSEG data showed.
Freight rates from the US to Asia have also surged, further undermining the economics of shipping West Texas Intermediate to the region and making Murban more competitive.
The rate to charter a very large crude carrier to ship two million barrels of crude from the US Gulf Coast to China jumped 61 per cent in nearly two weeks to $13.5 million on Tuesday.
Recent disruptions to oil exports via the Caspian Pipeline Consortium also supported Murban's demand as an alternative grade, traders said.
Indian refiners have been seeking to reduce reliance on Russian oil due to tougher western sanctions.
India's December crude imports from the Middle East hit 2.78 million barrels per day in December and 2.86 million bpd so far this month, the highest since April 2022, Kpler data showed.
State-run Bharat Petroleum has awarded its one-year tenders to buy Iraqi oil and Oman crude, and is also seeking Murban oil through a separate tender, traders said.
Each cargo is 500,000 barrels.
(Reporting by Siyi Liu in Singapore; Editing by Florence Tan and Sherry Jacob-Phillips)
