UAE’s Upper Zakum crude oil exports fell in March after ADNOC diverted supply to its own refinery and boosted shipments of Murban oil, according to Reuters.
This shift has tightened medium-sour crude availability in Asia, impacting the number of Upper Zakum cargoes during S&P Global’s crude price assessments for the Middle Eastm crude Dubai and supporting the benchmark.
“They invested a lot of money over at least 3-4 years upgrading Ruwais to run heavier grades so it makes a lot of sense to run Upper Zakum and sell Murban,” said Adi Imsirovic, director of Surrey Clean Energy.
ADNOC’s strategic move to process Upper Zakum at its Ruwais refinery, following substantial investments in upgrading the facility, has led to a rise in Murban sales due to higher revenue potential. This transition aligns with the UAE’s OPEC production quotas.
In 2018, ADNOC invested $3.5 billion and enhanced its refinery’s capacity to process 420,000 bbl/d of heavier and more sour crudes, including Upper Zakum.
ADNOC started shipping Upper Zakum crude to its refinery in September, with volumes reaching 200,000 to 300,000 bpd in February and March, according to Reuters.
Recent data indicates an increase in Upper Zakum shipments to Ruwais, reaching 366,000 barrels per day (bbl/d) in March 40% overall shipments), up from 152,000 bbl/d in February.
However, overall Upper Zakum exports in March are forecasted to drop to around 650,000 bbl/d from the 2023 monthly average of 940,000 bbl/d, according to Reuters.
Middle East medium-sour crude exports have fallen as new refineries in Kuwait, Oman, the UAE and Saudi Arabia demand local crudes, said Janiv Shah, Rystad’s vice president of oil markets.
“The largest importer of Upper Zakum and Middle Eastern medium sour barrels is China, who must pivot to importing similar grades as Chinese country level refinery runs increase through 2024 on demand increases, yield shifts and new refinery capacity,” he added.
Exports of Upper Zakum to China, India, South Korea, Thailand and Singapore fell about 50% or more in March from a year earlier, Kpler data showed, while supply to Japan slipped 13%.
ADNOC notified term customers late last year that their Upper Zakum supply for 2024 will be reduced and offered to replace it with Murban, its flagship grade.
Asian refiners are turning to alternatives from Qatar and Saudi Arabia to substitute Upper Zakum, given Murban’s lighter quality.
Last week, ADNOC increased Murban export forecasts from June to October to between 1.631 million bpd and 1.658 million bpd. Kpler data showed exports averaged at 1.1 million bpd in 2023.
The jump in Murban supply has weighed on prices, narrowing its gap with Upper Zakum to about 10 cents a barrel, versus the typical 80-cent gap, a Singapore-based trader told Reuters.
