While oil demand in Europe and the United States continues to disappoint, refiners in Asia are racing to procure crude from around the world, giving the oil market some hope that at least in one region, demand is strengthening in the fourth quarter.
Lower term supplies from major OPEC producers due to the OPEC+ cuts, new import quotas for independent refiners in China, and strengthening fuel demand in India have all combined to create a bidding war for crude grades from all around the world going to Asia at the beginning of 2021, traders have told Bloomberg.
The increased demand for crude has pushed the price of Russia’s ESPO blend for January loading to the highest premium over the Dubai benchmark in five months. ESPO is very popular with refiners in China and Japan, but Chinese refiners are also snapping up cargoes from Angola and Brazil, according to the traders who spoke to Bloomberg. Japan and South Korea are also buying more cargoes from Qatar and the United States.
Some of the increased purchases are due to the fact that the top Middle Eastern producers and exporters, Saudi Arabia and Iraq, have recently reduced term supplies to their customers. Related: Oil Prices Under Pressure As Oil And Gasoline Inventories Build
Demand in Asia is also supported by India, which sees a recovery in fuel demand that rose year-on-year in October for the first time since February.
Shipbrokers told Reuters that the oil trading units of major oil firms, including Shell and China’s Sinopec, have been on the lookout to book supertankers to send U.S. crude oil from the Gulf Coast to Asia next month. This has pushed the price of the West Texas Intermediate at Magellan East Houston WTI-MEH to the highest in two months, according to Reuters data.
Demand in China and the wider Asia region is currently the only bright spot on the oil market as demand remains depressed in major developed economies in Europe and in the United States, which are grappling with a surge in COVID-19 infections.
By Josh Owens for Oilprice.com
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