The spot market for Middle East crude cargoes loading in April was virtually non-existent this week, as demand continues to be depressed due to the coronavirus outbreak while buyers are waiting for cargoes to become even cheaper than they are now, trade sources told S&P Global Platts on Friday.
There was no buying interest or market activity for the April trading cycle this week, as refiners in China are cutting refinery runs, while commodity trading houses and oil majors are scrambling to find spot buyers for crude oil outside China.
As the coronavirus continues to batter fuel demand in China, the country’s second-largest refiner, state-held PetroChina, is cutting refinery runs and is talking to key suppliers in the Middle East about possibly deferring some crude oil loadings or reducing volumes, a senior PetroChina official with direct knowledge of the plans told Reuters earlier this week.
Due to the lower demand in China, Middle Eastern buyers are asking other Asian customers if they could accommodate more crude oil cargoes under the term contracts, five sources familiar with the matter told Reuters on Thursday. The crude marketing companies of OPEC producers Iraq and Kuwait have asked Asian buyers if they could be willing and able to buy more oil for loading in March, the sources told Reuters, in a sign that the Middle Eastern oil producers are grappling with growing oversupply amid the drop in Chinese crude oil demand. Related: The Real Reason The Saudis Are Desperate To Restart This Giant Oilfield
The slowdown in China’s industrial activity and the shutdown of factories amid the coronavirus outbreak is causing the worst shock to oil demand in over a decade, Jeff Currie, global head of commodities research at Goldman Sachs, said on Bloomberg last week.
Due to the virus outbreak, OPEC slashed its global oil demand growth estimate for this year by 230,000 bpd from last month’s assessment and now sees oil demand growth at just below 1 million bpd—at 990,000 bpd.
One of the world’s biggest commodity traders, Trafigura, has also revised down its global oil demand growth forecast—from 1.3 million bpd growth expected before the outbreak to around 1 million bpd now, executive chairman and CEO Jeremy Weir told Fox Business this week.
By Tsvetana Paraskova for Oilprice.com
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