UAE's Upper Zakum crude exports dropped significantly as Abu Dhabi National Oil Company (ADNOC) prioritised supplying its refinery with Murban oil in March, shifting the market dynamics, as per a Reuters report citing industry sources and data. ADNOC's move to refine heavier grades at its Ruwais facility tightened the availability of medium-sour crude in Asia, affecting the delivery of Upper Zakum cargoes during price assessments. This strategy, according to Adi Imsirovic of Surrey Clean Energy, maximises revenue while meeting production quotas set by OPEC+. Moreover, ADNOC's substantial investment in upgrading its Ruwais refinery since 2018 enabled it to process heavier grades like Upper Zakum, aligning with its strategy to optimise revenue. The company's Upper Zakum shipments to Ruwais surged to 200,000 to 300,000 bpd in February and March, significantly impacting the overall export volume. Data from Kpler indicates that Upper Zakum shipments to Ruwais soared to 366,000 bpd in March, comprising 40 per cent of total exports, up from 152,000 bpd in February. Despite Rystad's forecast of reduced Upper Zakum exports to about 650,000 bpd in March, down from the 2023 monthly average of 940,000 bpd, the demand for Middle East medium-sour crude remains robust, especially from emerging refineries in the region. Janiv Shah of Rystad highlights the shift in import patterns, particularly in China, where demand for similar quality crudes is rising due to refinery expansions and yield shifts. Consequently, Upper Zakum exports to key Asian markets such as China, India, South Korea, Thailand, and Singapore declined by over 50 per cent in March compared to the previous year, with Japan witnessing a 13 per cent drop. Notably, ADNOC's decision to reduce the Upper Zakum supply for 2024 and offer Murban as an alternative has reshaped the market dynamics, tightening the Dubai benchmark while weakening Murban futures. This shift prompted Asian refiners to seek alternative sources like Qatar and Saudi Arabia for similar quality oil, as Murban's lighter grade differs from Upper Zakum. ADNOC's recent forecast of increased Murban exports from June to October further influenced market sentiments, with exports expected to reach between 1.631 million bpd and 1.658 million bpd. This surge in Murban supply has narrowed the price gap between Murban and Upper Zakum to approximately 10 cents per barrel, significantly lower than the historical 80-cent gap.
