Middle East Supply Pressures Caspian Crude Prices

Caspian crude prices are coming under pressure as Middle East oil supplies rebound, narrowing premiums for Kazakhstan's CPC Blend and Azerbaijan's Azeri BTC grades.

(Reuters) — Prices for Caspian-origin crude oil grades, Kazakhstan's CPC Blend and Azerbaijan's Azeri BTC, are extending losses amid growing pressure from prompt barrels in Europe, traders said.

Differentials of Caspian crude oil to Brent have weakened in line with a broader global trend. Physical cargoes across many regions have slipped to discounts to the dated benchmark as rising Gulf supplies weigh on the market, with Iran expected to lift sales following a temporary easing of U.S. sanctions.

Outright oil prices were also easing on Wednesday, extending declines seen earlier this week and hovering near four-month lows, as more tankers stranded in the Gulf prepare to transit the Strait of Hormuz.

The sharp drop follows a 60-day interim agreement between the United States and Iran to end the conflict that began on February 28. It has allowed a partial resumption of shipping through the strait, which handled about a fifth of global oil and LNG flows before the war.

CPC Blend differentials have fallen to a discount of about $4 per barrel to Brent from some minus $0.50 per barrel, while Azeri BTC has weakened to a premium of around $3.50 a barrel from over $5 per barrel earlier this month, traders said.

Both grades had surged during the height of the conflict involving Iran, the United States and Israel, with premiums briefly exceeding $10 a barrel for Azeri BTC and $8 for CPC Blend, according to trading sources.

Additional pressure on CPC Blend comes from rising supply. Loadings of the grade hit a record 1.83 million barrels per day last month, up from 1.67 million bpd in April, and are expected to remain elevated in June, market participants said.