April 6, 2022

WWW.ENERGYINTEL.COM

North Sea Trade Cools Off as Panic Dissipates

  • May North Sea crude loadings are penciled at 755,000 b/d, nearly 120,000 b/d higher than a year ago.
  • The Brent prompt premium has been on a roller-coaster ride, now trading at $12/bbl after surging to $30.90/bbl.
  • Brent CFD swaps that connect the forward and futures market have collapsed in the past two weeks.

Europe is the region most affected by the war in Ukraine and the subsequent sanctions against Russia, and yet North Sea spot prices are falling. Last month there was a small patch of trading followed by several oil majors' decision to sever oil ties with Russia.

Still, the North Sea physical market has been rather slow since the May export program was released.

Softening Market

At 755,000 barrels per day, the combined volumes of Brent, Forties, Oseberg, Ekofisk and Troll (BFOET) that make up the Brent pricing basket are up 177,000 b/d, or 18.3%, compared with May 2021.

Three weeks ago, Forties was trading at a historic high of $4.95 per barrel to dated Brent and is now down to a much thinner 85¢ premium. “A $4 drop in differentials tells you that the market is weakening and not tight," a refining source said.

And the Brent CFD swap structure that links the forward and futures market has collapsed. In the last two weeks, the front-week CFD was $12/bbl and is now down to $2.50/bbl. The four-week CFD spread was $4.60/bbl and is now down to 80¢/bbl, sources said.

Ample relief barrels will soon head to Europe — from the US, West Africa and some rerouted spot cargoes from the Middle East — while refinery turnarounds will take some capacity off line.

North Sea Loadings for May and April 2022
(million bbl)Standard CargoMay No.May Vol.Apr No.Apr Vol.
Norway
Ekofisk600.011.06.612.06.0
Oseberg600.05.03.05.02.4
Troll600.08.04.87.03.6
UK
Brent600.03.01.82.01.2
Forties600.012.07.213.07.8
Total----23.4--21.0
Total ('000 b/d)----755.0--700.0

Panic Dissipates

As a result, open market trading has been rather quiet since the start of the May trading cycle.

If anything, the sluggishness suggests that refiners are comfortable waiting for prices to drop and are in no rush to secure North Sea barrels immediately. This widens the disconnect with a still ebullient Brent futures market.

Part of the North Sea light, sweet market usually is a natural blending complement to Russia’s Urals crude and would hence be jointly purchased. But part of the North Sea sour supply also competes with Urals to get into the Northwest Europe and Mediterranean markets.

“What the market is saying is that refiners are confident they can find crude for their refineries and that the market is not as tight as it is being suggested. The panic buying has dissipated," the refiner said. At least this is the case for now.

Created with Highcharts 9.0.0('000 bbl)NORTH SEA LOADINGS: DATED BRENT BENCHMARK STREAMSFortiesEkofiskTrollOsebergBrentMay'22Apr'22Mar'22Feb'22Jan'22Dec'21Nov'21Oct'21Sep'21Aug'21Jul'21Jun'21May'2102505007501,000Source: Energy Intelligence

More Sverdrup for Europe

About 535,000 b/d of Norway’s Johan Sverdrup medium, sour crude add up to the regional North Sea supply in May. Sverdrup constitutes a fit, but more expensive Urals replacement, especially given the current $35/bbl-plus discounts on the Russian flagship export grade.

Traders expect more Sverdrup volumes to stay in Europe, where they will replace Urals and attract higher bids. In Northwest Europe, several refiners, including Neste Oil’s Porvoo refinery in Finland and PKN Orlen’s Mazeikiai refinery in Lithuania, have already snatched greater volumes in March.

Elsewhere, March loadings of North Sea Grane, another potential sour crude substitute to Urals, were previously deferred by 15-31 days. Only three cargoes will be shipped in April, with the remaining six now planned to load next month. May loadings of Grane are now 116,000 b/d, against a revised 60,000 b/d for April.

omb220405_sankey.svg

North Sea Loading Program for May 2022
LoadingBarrels(b/d)ParcelEquity
Brent
04-06600,00019,355B0501Glencore
14-16600,00019,355B0502Repsol
29-31600,00019,355B0502Total
Forties
03-05600,00019,355F0501Shell
06-08600,00019,355F0502Eni
08-10600,00019,355F0503BP
10-12600,00019,355F0504Suncor
13-15600,00019,355F0505Shell
15-17600,00019,355F0506CNOOC
17-19600,00019,355F0507Total
20-22600,00019,355F0508Shell
22-24600,00019,355F0509BP
24-26600,00019,355F0510Eni
27-29600,00019,355F0511Suncor
29-31600,00019,355F0512Shell
Oseberg
05-07600,00019,35520220501Equinor
11-13600,00019,35520220502Equinor
17-19600,00019,35520220503ConocoPhillips/Equinor/Lime/Neptune
23-25600,00019,35520220504Total
29-31600,00019,35520220505Equinor
Ekofisk
02-04600,00019,355C12965Shell
06-08600,00019,355C12967Total
09-11600,00019,355C12961BP
11-13600,00019,355C12968Total
14-16600,00019,355C12963Eni
17-19600,00019,355C12962BP
19-21600,00019,355C12959ConocoPhillips
22-24600,00019,355C12964Eni
25-27600,00019,355C12969Total
28-30600,00019,355C12966Shell
30-01600,00019,355C12960ConocoPhillips
Troll
30-02600,00019,35520220401Equinor
07-09600,00019,35520220402Spirit/Wintershall
11-13600,00019,35520220403Equinor
15-17600,00019,35520220404Var Energi
19-21600,00019,35520220405Equinor
23-25600,00019,35520220406Equinor
27-29600,00019,35520220407ConocoPhillips/Equinor/Idemitsu
30-01600,00019,35520220408Equinor
Johan Sverdrup
30-022,000,00064,51620220530Equinor
04-06600,00019,35520220531Lundin
05-072,000,00064,51620220532Equinor
09-112,000,00064,51620220533Lundin/Total
13-151,000,00032,25820220534AkerBP
15-172,000,00064,51620220535Lundin
19-212,000,00064,51620220536Equinor
22-242,000,00064,51620220537Equinor
26-281,000,00032,25820220538AkerBP
28-302,000,00064,51620220539Equinor
TOTAL BFOET23,400,000754,83939 cargoes--
Total Johan Sverdrup16,600,000535,48410 cargoes--
Total BFOET Plus Johan Sverdrup37,000,0001,193,54849 cargoes--

Julien Mathonniere, London