The market faces key OSP adjustments ahead amid geopolitical uncertainty

Atlantic Basin:

• Niger crude production increases, enabling a record high in Meleck exports in October
• Sudan is ready to restart exports of South Sudan's heavy sweet Dar Blend crude
• Nigeria's Dangote refinery sells first gasoline to domestic buyers

Europe and FSU:

• Kashagan field maintenance ends earlier than expected
• Russian exports to Turkey rise as 220 kbd Star refinery completes maintenance
• European medium-density crude differentials remain pressured

Middle East and Asia:

• The US election presidential outcome could impact Iranian oil exports by mid-2025
• Preliminary OPEC+ data shows a modest increase in exports, led by Saudi Arabia and Libya
• Next week’s OSPs are expected to maintain competitive pricing amid easing Dubai backwardation and pressured refining margins

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Atlantic Basin: Pipeline repairs in Sudan and Niger point to increase crude exports out of WAF

Record high Niger’s Meleck crude exports hint at higher production levels

Niger crude production has historically hovered around 20 kbd, and this output was largely consumed domestically (at the 20 kbd Zinder refinery) due to limited export infrastructure. With the completion of the Niger-Benin pipeline by CNPC in March 2024, hopes rose that oil output could move higher and Niger would become a crude exporter by transporting its medium sweet Meleck (API of 25.5, Sulfur content of 0.3%) crude to the port of Seme in Benin. While May marked the first month we saw a vessel carrying Meleck depart, one month later Benin suspended authorization to load oil from Niger at Seme port, leading to the shutdown of the Niger-Benin pipeline and no additional shipments in June and July. However, our data shows that the Niger-Benin pipeline has been operational again since August, given that one Suezmax departed to China in August and another Suezmax went to Malaysia in September, equivalent to 35 kbd of exports in both months and suggesting crude production levels around 40 kbd (double y/y). Notably, Meleck exports have jumped to 70 kbd in October, a record high and equivalent to two Suezmax loadings – the Front Coral loading on 15 October to Singapore and the Pertamina Halmahera departing to China on 23 October. This suggests that oil production in Niger is on the rise, prompting us to adapt Niger oil production levels to 50-70 kbd for the rest of 2024. These developments are also in line with CNPC’s plans to ramp up close to 100 kbd next year, with the additional supply coming from the Koulele, Dibeilla, and FGD (Faringa, Gololo, Dougoule) oilfields. Higher Meleck availability should intensify the competition among West African crude, particularly similar quality barrels from Angola going to Asia. Hence, we could see some downward pressure on differentials for grades such as Kissanje or Girassol, which are currently trending at -$0.25/bbl and $1.95/bbl vs NSD.

Niger's Meleck crude exports, kbd

Source: Kpler

Heavy sweet Dar Blend exports from Sudan to resume soon

Earlier this year, crude flows through the PetroDar pipeline, which delivers the South Sudanese Dar Blend crude (26.4 API, 0.1%S) from the Palogue and Adar Yale oil fields in the Melut Basin to the Bashair export terminal on Sudan’s Red Sea coast, were stopped due to a pipeline rupture in Khartoum caused by the fighting between the Sudanese army and the RSF. This prompted the declaration of force majeure on Dar Blend crude loadings in February 2024, pressuring Sudanese crude exports from a 2023 average of 135 kbd to 90 kbd so far this year, as only Nile crude exports continued (see chart). However, in late September, South Sudan’s President Salva Kiir and General Burhan reached an agreement to resume oil exports via the PetroDar pipeline and on 20 October, Sudan's government confirmed that the pipeline is fully operational again. We therefore expect Sudan’s crude exports to rebound from current levels of 70-80 kbd to above above 130 kbd soon. Over the past years, the majority of Dar Blend exports went to topping plants in the UAE for VLSFO production, however amid lacking heavy sweet crude supply, the Montfort refinery in Fujairah had to drastically reduce VLSFO production. The resumption of the South Sudanese grade will lengthen Asia's VLSFO markets, weighing on Singapore VLSFO prices. Moreover, the increased availability of Dar Blend in Asia could somewhat pressure differentials for medium and heavy sweet grades such as Chad’s Doba Blend and Brazil’s Tupi. Finally it should be noted that Sudan’s civil is still ongoing, hence the risk of future disruptions remains.

South Sudanese crude exports (via Sudan), kbd

Source: Kpler

First gasoline departs the Nigerian Dangote refinery in October

This month has seen the first gasoline cargo depart the Dangote refinery, a historic moment, with the Sabaek vessel carrying 500 kb of gasoline loading on 15 October and arriving at Tincan Island (Nigeria) on 16 October.  We estimate that gasoline production at Dangote is currently around 50-70 kbd, with the reformer and isomerisation units already running for several months, enabling the production of reformate. The RFCC has also been starting up over the past few weeks, but we only project stable production out of the key unit for on-spec gasoline production (FCC) in early 2025, also enabling the supply of Euro-5 gasoline at that point. At full capacity, Dangote will be able to produce up to 300 kbd of gasoline, which could lengthen West African gasoline balances from a deficit of -500 kbd in 2024 to -300 kbd in 2026. Hence, the WAF market for gasoline imports will shrink considerably, a dynamic we already saw unfold in October. Nigerian imports of European gasoline have dropped to multi-year lows of 130 kbd, with 60% of these inflows originating from Belgium. Hence, the country might look for new off-takers of its gasoline barrels soon.

Sabaek carrying gasoline going from Dangote to Tincan Island

Source: Kpler, mapbox

Europe and FSU: Kashagan field maintenance ends ahead of schedule

Kashagan field maintenance ends earlier than expected

Planned field maintenance at Kazakhstan’s 400 kbd Kashagan field has come to an end, according to remarks made by the country’s energy minister on 30 October, with crude production reportedly ramping back up and expected to reach its maximum capacity in early November.  

The earlier-than-expected start-up of the field (initially, it was early November) will help lift the availability of light sweet crudes in the region. The latter assumption will keep a lid on light sweet crudes typically consumed in the Med (Med Sea + Black Sea region), such as BTC, Sahara Blend, and Libya’s Es Sider grade. The latter grade has already been coming increasingly under pressure amid a ramp-up in Libyan crude supply last month. Even though crude demand in expected to rise over the remainder of the year, in line with seasonality (with refinery maintenance coming to an end), the rise in crude flows from Kazakhstan likely will keep a lid on regional differentials in November.  

Med light crude differentials vs North Sea Dated, $/bbl

Source: Argus Media

Russian exports to Turkey rise as 220 kbd Star refinery completes maintenance

Socar has completed a full turnaround at its 220 kbd Star refinery in Aliaga. Maintenance at the refinery has been keeping a lid on regional crude demand, with Turkey’s crude intake averaging only 600 kbd in September and October. We estimate that demand will rise strongly next month and settle around 750 kbd in November.

Considering the decline in overall demand over the last two months, seaborne crude arrivals have been coming increasingly under pressure, with Turkey's crude imports falling almost continuously over H2 so far. Flows remain on pace to average 440 kbd this month, representing a 20 kbd m/m decline and marking the lowest level since July. It should be noted, however, that Russian crude flows, particularly exports of Urals, have rebounded in October, with Turkish imports of Urals rising by 50 kbd m/m and surpassing 200 kbd this month. With Turkish crude demand expected to ramp up in November, we can expect imports of Urals to return to around 300 kbd.

Turkey’s monthly crude imports by region, kbd

Source: Kpler

European medium-density crude differentials remain pressured

A combination of seasonally declining European crude demand, robust flows from Brazil and the Middle East, and flat middle distillate cracks have been keeping medium density crude differentials in Europe under pressure over the last month. In fact, middle distillate cracks in NWE and the Med have remained in a very tight range of around $14-16/bbl so far this month. Considering the above, Johan Sverdrup crude differentials have remained in discount territy versus North Sea Dated (see chart above).

A rise in competition of grades comprising similar attributes from the Middle East and Brazil have played an important role in keeping Europe well supplied in terms of medium density crudes. In fact, European imports from Brazil have averaged around 500 kbd this month, representing an increase of 50 kbd m/m and marking the fourth highest level on record. Nevertheless, we could expect to see some support over the next two months come from a tightening in balances, which should keep demand for Johan Sverdrup supported.  

Regional sweet-sour spreads, $/bbl

Source: Argus Media  

Middle East and Asia: Asia oil market cools amid US election uncertainty and OPEC+ adjustments

The US election presidential outcome could impact Iranian oil exports by mid-2025

Oil prices dropped nearly 4% over the past week, primarily due to a reduction in the geopolitical risk premium following Israel's retaliation against Iran and ongoing weak fundamentals in China. A notable example is PetroChina's plan to shut down its Dalian refinery, which underscores the challenges in China’s refining sector. Looking ahead, next week’s US presidential election outcome is set to play a critical role in the trajectory of the Israel-Iran conflict. Should Harris win, Iran may be more likely to retaliate against Israel’s recent strikes. Conversely, a Trump victory could embolden Israel to take further action aimed at weakening Iran's military capabilities. A Republican win could reintroduce some risk premium into flat oil prices, as markets may interpret this as signalling lower Iranian supplies.

However, even with a potential new Trump administration, reducing Iran's oil exports quickly would be challenging. Any meaningful impact would likely require pressuring China to reduce purchases from Iran, particularly in Shandong's independent refineries. Given Asia's weak refining margins, such pressure would likely face resistance from Chinese authorities, as it could drive up feedstock costs, compress margins further, and make China's overall crude imports more expensive. If Trump does win, we estimate it would take around 5-7 months before these measures could reduce Iran’s oil exports, potentially lowering them by 500-600 kbd by mid-2024.

Main suppliers of China’s seaborne imported oil, kbd

Source: Kpler

Preliminary OPEC+ data shows a modest increase in exports, led by Saudi Arabia and Libya

Preliminary data on OPEC+ seaborne oil exports indicate a slight uptick, with shipments rising by 90 kbd to 29.05 Mbd. Saudi Arabia and Libya each boosted exports by over 400 kbd m/m, while Iran's exports saw a similar reduction after a record month in September under US sanctions. Iran's schedule was disrupted earlier in the month following its missile launch on Israel, causing tankers to avoid the Kharg terminal, but volumes quickly returned to normal.

Saudi exports, meanwhile, climbed back above the 6 Mbd mark for the first time since May, averaging 6.37 Mbd. This rise was driven by lower domestic demand as summer waned and crude burn fell by 100 kbd m/m. Saudi shipments are likely to keep rising through November, as the 430 kbd Yanbu refinery undergoes maintenance until year-end. Iraq’s adherence to OPEC+ quotas also improved, cutting exports by 25 kbd to 3.29 Mbd, marking the lowest level since May 2023.

OPEC+ seaborne oil exports variation in October, kbd

Source: Kpler

Next week’s OSPs are expected to maintain competitive pricing amid easing Dubai backwardation

In the UAE, exports dropped by 140 kbd m/m, primarily due to reduced Murban crude availability (down by 92 kbd). This tightening has helped IFAD Murban's premium to Dubai swaps recover to $1.60/bbl, despite gasoline cracks underperforming compared to gasoil cracks in East of Suez. With Asian refiners now negotiating term contracts for next year, the upcoming OSP announcements will be key indicators of Middle Eastern producers' pricing strategies. Given the loosened Dubai backwardation (M1 vs. M3) to an average of $1.43/bbl in October (down from $1.91/bbl last month), a cut of at least $0.50/bbl in OSPs seems likely, aiming to keep Middle Eastern crudes competitive for Asian buyers. OSP adjustments will be crucial, as any further delay in OPEC+ production hikes, as we expect, would likely narrow sweet-sour spreads.

Key oil market structures, $/bbl

Source: Argus Media

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