Premiums for Caspian Oil Grades Surge vs Brent Amid Middle East Supply Disruptions, Traders Say

Caspian Oil Premiums Jump vs Brent as Middle East Disruptions Hit Supply

Impact of Middle East Conflict on Caspian Oil Markets

Rising Prices for Caspian Oil Grades

MOSCOW, March 17 (Reuters) - Prices for Caspian oil grades, Kazakhstan's CPC Blend and Azerbaijan's BTC, surged this month as supply shortages triggered by the Iranian war pushed premiums for the oil in Mediterranean market well above the dated Brent benchmark, traders said.

Oil and petroleum product prices in Europe have been rising since the beginning of the month due to supply disruptions caused by the war in the Middle East, as European refineries seek alternatives to Middle Eastern grades to maintain fuel production.

Role of CPC Blend and Azeri BTC in European Markets

CPC Blend and Azeri BTC crude grades have mostly been supplied to the Mediterranean and Europe in recent months, as they are located close to these markets and are valuable feedstock for the European refineries.

Premiums and Market Dynamics

CPC Blend Premiums and Supply Disruptions

CPC Blend cargoes loading in March and April traded at premiums of $1-2 per barrel against dated Brent last week, reversing recent discounts of up to $5 per barrel, market sources said. The grade, a key feedstock for Mediterranean refiners, has seen its exports disrupted in recent months due to adverse weather conditions and drone attacks in the Black Sea and operational issues at Kazakhstan's Tengiz oil field.

Instability in CPC Blend Loadings

"CPC Blend is one of the grades Mediterranean refiners hope to rely on amid supply disruptions in the Middle East, but unfortunately its loadings are also rather unstable," a trader in the European market said.

Last month, unstable loadings pushed CPC Blend prices to record discounts, but improved exports have lifted premiums in April. 

Risks from Black Sea Attacks

Also CPC Blend loadings are disrupted by attacks on the tankers in the Black Sea. Over the weekend a Greek-managed tanker destined for the CPC terminal was hit by an unidentified object and suffered minor damage. These risks are keeping premiums for CPC from further firming and rising freight and insurance costs, traders said.

Azeri BTC Oil Export Stability

Meanwhile, Azeri BTC oil exports remained stable, with premiums for the light, sweet grade rising sharply amid supply shortages in Europe, traders said. BTC cargoes loading in April traded at premiums of $5-6 per barrel and above, rising from premiums of around $4 per barrel last month, as sellers sought to capitalize on strong demand.

(Reporting by Reuters; Editing by Chizu Nomiyama )