ADNOC sets July Murban crude at $101.48 as supply swells

Abu Dhabi National Oil Co. priced its July Murban crude at $101.48 a barrel and set Umm Lulu at parity, as a wave of Middle Eastern supply pushes physical crude markets into discounts across Asia and Europe.

"Most refiners have already completed their orders for this month and next, and available crude would need to be significantly discounted to prompt any more buying," said a trader familiar with Adnoc's tender process, asking not to be identified as they aren't authorized to speak publicly.

Adnoc sold about 60 million barrels across three tenders for June-to-August loading, with oil majors including Shell Plc and trading house Mercuria Energy Group Ltd. snapping up cargoes, according to traders. Some barrels are expected to flow toward Europe as Chinese buyers step back. Iraq and Kuwait have also been ramping up output as producers position for a potential reopening of the Strait of Hormuz, with talks over a lasting agreement to end the Iran war showing some progress.

The pricing arrives as Dubai and Murban forward curves have flipped into contango — a bearish structure signaling ample supply relative to demand. A temporary U.S. waiver allowing purchases of Iranian oil has added to swelling supply options, though financing and insurance complications remain. Traders said freight costs remain too expensive for floating storage to be effective, but countries with onshore storage sites should be able to easily accommodate surplus barrels.

The official selling price from Adnoc serves as a key benchmark for Middle Eastern crude flows, influencing physical trading across the Persian Gulf. The state producer has also asked customers with long-term contracts to immediately resume loading supplies, crimping spot demand further.

Supply Glut Pressures Middle East Benchmarks

The contango structure in Dubai and Murban reflects a market awash in crude. Brent crude, the global benchmark, has also faced headwinds as the supply overhang from the Middle East compounds concerns about slowing demand growth. Asian refiners, which typically absorb the bulk of Persian Gulf output, have slowed purchases after a three-week buying spree, with Adnoc's fourth tender round expected to show similar patterns of tepid demand.

The shift marks a reversal from earlier this year, when tight supply and geopolitical risk premiums kept Middle Eastern grades at elevated levels. The last time Murban traded in sustained contango was during the second quarter of 2020, when the Covid-19 pandemic crushed global oil demand and storage filled rapidly.

This article is for informational purposes only and does not constitute investment advice.