- China ramps up crude processing as margins improve.
- Asian refiners back from maintenance.
- Strong demand push Oman, Russian ESPO, Sokol to 11-mth high.
- Supply tight as Europe, Africa, U.S. crude to Asia uneconomical.
A recent Reuters news source by Florence Tan says that crude prices in Asia jump on robust demand, tight supply.
Higher premiums paid by Asian refiners
Asian refiners are paying the highest premiums for Middle East and Russian crude oil in about a year, due to firm demand and more costly imports from the West, industry sources said.
High prices could prompt refiners to draw down inventories, tightening supply buffers even as the Organization of the Petroleum Exporting Countries (OPEC) and their allies including Russia gradually ease supply cuts.
Several popular grades in Asia, such as Oman, Russian ESPO and Sokol crude, are trading at the highest premiums in 11 months against Dubai quotes, according to trade sources and Refinitiv data.
Spot crude prices in Asia
The spread between first and third month cash Dubai prices is at its widest backwardation since pre-COVID levels in January 2020, Reuters data showed, indicating strong demand for prompt supplies.
Spot crude prices in Asia are a leading indicator for global markets as several of the world’s top importers are located in the region. Asian refiners also typically buy oil two months in advance, earlier than other regions.
Refineries in other parts of Asia
Refineries in other parts of Asia are also cranking up after maintenance to meet demand during the peak summer season in the northern hemisphere, including during the Tokyo Olympics which start in July, they said.
However, importing crude oil from Europe, West Africa and the United States is currently uneconomical as Brent’s premium to Dubai has widened while spot premiums for grades such as Angola’s Cabinda and Kazakhstan’s CPC Blend have climbed, the sources said.
Asian refiners will buy crude
While Asian refiners will buy crude to meet baseload demand, or the minimum amount of crude required for a refinery, they are likely to draw down inventories for incremental supplies, the industry sources said.
Energy Aspects expects a global crude stocks draw of 2.7 million barrels per day (bpd) in the third quarter, compared with 1.4 million bpd in the second quarter.
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Source: Reuters
