Omicron Threatens Asian Oil Demand as Prices Favor Atlantic Crude Oil | Investment News

By Noah Browning and Florence Tan

LONDON/SINGAPORE (Reuters) – Recent shifts in the relative price of different grades of crude have given oil exporters in the vast Atlantic Ocean basin the best chance in months to sell to Asia’s biggest consumer region. , but sales were slow as feared by COVID-19 cold demand.

The Omicron variant of the coronavirus has dampened oil consumption in Asia, just as American and West African sellers have pinned their hopes on the changing market structure providing an easier path east than competing oil from the Middle East.

Global benchmarks Brent and West Texas Intermediate took a beating last week as tight supplies eased on the back of the U.S. Strategic Petroleum Reserve -tap-2021-11-18 (SPR) sales and country organization decision oil exporters and their allies to increase production

Brent crude’s premium to Dubai quotes fell to $2.56 a barrel last week, the lowest since March, making exporting Atlantic Basin crude oil more attractive to Asian buyers, traders say and data from Refinitiv.

Sales of Nigerian and Angolan oil to India increased, alongside sales of US WTI Midland crude to East Asia.

Angolan Girassol crude and Nigerian Qua Iboe were offered at robust premiums of $1.60 and $1.40 above dated Brent per barrel respectively on a free on board basis – still cheap compared to qualities light from the Middle East. [CRU/TENDA][CRU/WAF]

“We have seen an arbitrage window open, and demand from India and some markets further east has been encouraging in recent weeks, which has kept offers high,” he said. a West African crude oil seller.

“Trading has, however, become calmer in recent days. There is still a lot of uncertainty as to how/if the new lockdowns will affect demand in the new year.”

With the refinery maintenance season scheduled to start in March and refining margins having fallen sharply recently due to Omicron fears, Asia’s appetite may not be as robust as before.

Traders said Chinese buyers would not be easily tempted by more affordable barrels, with independent refiners allotted slimmer import quotas this year and state-owned enterprises already well supplied.

Ongoing tax investigations in Shandong province, where most independents are based, have also dampened appetite for Brazilian and African oil from the world’s biggest importer.

Beijing is also expected to hold a second auction of SPR crude from its storage east of Zhoushan.

Bids for grades like Congo’s Djeno hovered around $2 a barrel above March ICE Brent for delivery to China, down from peaks of around $3 a barrel last month, a source said. East Asian buyer.

“We’ve mostly done our shopping for the year. Bids are just too high and the market doesn’t justify Atlantic Basin crude being this expensive now with the pandemic returning,” said a second buyer.

While the U.S. SPR release initially weakened values ​​for sour Atlantic Basin grades such as Mars crude and allowed some shipments to be sold in Asia, the window is now only “marginally open”, a trader says. based in Singapore.

The March spot discount hit its highest level in more than two months after WTI’s discount to Brent widened, boosting US demand for domestic crude. [CRU/C]

“It used to be cheap but now it’s not, and there hasn’t been much trade, so I don’t know if any (cargoes) have been placed,” another trader said.

(Reporting by Florence Tan in Singapore and Noah Browning in London; Additional reporting by Arathy Somasekhar in Bengaluru; Editing by Jan Harvey)

Copyright 2021 Thomson Reuters.

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Felix J. Dixon