Indian and Chinese oil buyers are snapping up geographic area crude after spot premiums for February-loading cargoes slumped by quite half to three-month lows on improved supplies to Asia.The call crude differentials, also seen in some European and African crude, comes as forecasters like OPEC predict a supply surplus in 2022. Still, views differ on the extent and average demand will still hit a record next year.
Easing concerns about the impact of the new coronavirus variant Omicron on Asia's fuel demand also are supporting Asian refiners' margins, trade sources said. Supplies to Asia are improving as pricing differences in crude grades make Atlantic Basin crude become more attractive. The Organization of the Petroleum Exporting Countries and their allies have also agreed to continue ramping up output by 400,000 bpd in January. India's Reliance Industries Ltd snapped up 4 MM bbl of national capital Das supplies on, while top refiner Indian Oil Corp has bought 3 MM bbl of Upper Zakum and Basra Heavy crude.
Fuel demand from the world's third-largest oil importer and consumer is strong as industrial activity picks up. Gasoil sales, which account for about two-fifths of India's overall refined fuel consumption, jumped nearly 18% within the half of December from the identical period in November.
In China, Rongsheng Petrochemical, the trading arm of top private refiner Zhejiang Petrochemical, bought 8 MM bbl of United Arab Emirates's capital and Oman crude for February-March loading, on top of 1 MM bbl of February-loading Abu Dhabi's Upper Zakum last week. The refiner also purchased a minimum of 2 MM bbl of Emirati and Iraqi crude for delivery between February or March and December.
Another mega Chinese refiner, Hengli Petrochemical, took three of 4 Qatari al-Shaheen crude cargoes in Qatar Energy's tender while the remaining cargo visited Japan's top refiner ENEOS Holdings.
But there has been less appetite from Chinese independent refiners which are hit by restrictions on import quotas, increasing scrutiny on nonpayment and probes into unapproved refining units in Shandong province. That has caused spot premiums for Russian ESPO crude to slide to four-month lows. Crude differentials have also weakened in other regions. the amount for sea Forties, often sold to Asia, has fallen from a two-year high reached in late November, although it's still at a premium to benchmark dated Brent. Angolan Cabinda has also declined.
Complex refining margins in Singapore, a bellwether for Asian refiners' profitability, hit a four-month low of $2.15 a bbl in late November on fears about Omicron's impact. they need since rebounded to about $6 a bbl.