Heavy crude may hit light-sweet parity on Reliance

SINGAPORE (Reuters) – Middle East sour crude could extend this year’s rally to reach an unprecedented parity with gasoline-rich sweet grades in coming months, as the world’s biggest new refinery in a decade fires up its furnaces.

Indian Reliance’s 580,000 barrels per day plant, formally commissioned on December 25 in time to meet a year-end target, enters a global oil market that has turned upside down since it was launched in mid-2005 amid a global refining capacity squeeze and as OPEC pumped every barrel it could.

Now, instead of hoovering up discounted, surplus heavy-sour crude from OPEC, Reliance may be chasing fewer barrels as the cartel cuts output by record volumes in a bid to cope with shrinking demand and put a floor under prices that have fallen more than $100 since July.

The discount for benchmark sour Dubai crude to light, sweet Brent — which stood at $5.90 in June — has already rallied to $1.20 a barrel, near the more than eight-year high of 80 cents hit in August.

Reuters