North Sea oil sellers quash one pocket of market strength

Earlier this month, a spate of buying of physical North Sea crude cargoes signaled a sudden tightness had appeared in the oil market. It wasn’t to last long.

On Monday, traders lined up to offer six cargoes of benchmark North Sea crude in a pricing window run by S&P Global Platts. It’s a move that pushed down spot premiums for the grades, with some falling by almost 50 cents a barrel when normally they would move in single digits.

It’s an indication that some of the recent enthusiasm in the oil market might be wearing off, with headline Brent prices topping $60 a barrel, and traders including Gunvor Group and Vitol SA cautioning over the prospects for a further rally in the very short-term.

A week earlier, some of the biggest participants in the oil market had been buying heavily. Royal Dutch Shell Plc bought more shipments in a single day than anyone has in 10 years, and then added to its purchases later in the week.

Since then, North Sea traders have been more cautious. Much of the buying interest has disappeared in recent days and has now been replaced by sellers. Weekly swaps, known as contracts-for-difference, also reflect the move. Their structure had weakened by about 27 cents from a week ago, indicating a softer market, according to PVM Oil Associates data.