Recent changes in the relative price of different crude grades have given oil exporters from the vast Atlantic Ocean basin the best chance in months to sell to Asia’s top-consuming region. However, sales have been slow as coronavirus worries cool demand.
The Omicron COVID-19 variant has restricted oil consumption in Asia. Meanwhile, the U.S. and West African sellers bound their hopes on the changing market structure. They covered more straightforward path eastward than competing oil from the Middle East.
Global benchmarks Brent and West Texas Intermediate crude took a hit last week as tight supplies eased with U.S. strategic petroleum reserve (SPR) sales and a resolution by the Organization of Petroleum Exporting Countries and their partners to increase production.
Brent crude’s premium to Dubai quotes fell to $2.56 a barrel last week. After March, this was its weakest, making Atlantic Basin crude oil exports more engaging for Asian buyers, as traders and Refinitiv data stated.
Asian Appetite Declining
Sales of Nigerian and Angolan oil to India have increased with U.S. WTI Midland crude sales to East Asia.
Angolan Girassol crude oil and Nigerian Qua Iboe have been given at robust premiums of $1.60 and $1.40 over dated Brent a barrel individually on a free-on-board basis. Still affordable compared with Middle East light grades. [CRU/TENDA][CRU/WAF]
Refinery maintenance season should last from March. Moreover, refining margins have come off sharply lately on Omicron fears. Therefore, Asia’s appetite might not be as strong as before.
Traders spoke that more affordable barrels wouldn’t lure Chinese buyers. Independent refiners allotted slimmer import quotas this year. Moreover, state companies received supplies previously.
Ongoing tax investigations in Shandong province, where most independents are based, have also controlled appetite for Brazilian and African oil in the world’s biggest importer.
Beijing should direct a second SPR crude auction from its eastern Zhoushan storage.
