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Asia continues to prefer buying cheaper Russian oil and hasn’t turned to Brent-linked cargoes from the Atlantic Basin despite the recent 10% slump in Brent oil prices, which has narrowed Brent’s premium over Middle Eastern benchmarks to the lowest in over two years, traders told Reuters.
Brent Crude prices have plunged by around 10% since the turmoil in the U.S. and European banking sector roiled global markets. Brent hit a 15-month low early this week before clawing back some losses to trade at $74 per barrel early on Wednesday in Europe.
The plunge in Brent has narrowed its premium over the Middle Eastern benchmarks. The Brent-Dubai Exchange for Swaps (EFS), the premium of Brent over the Middle Eastern benchmark Dubai, has narrowed to just $1.40 per barrel this week—the lowest premium of Brent over Dubai in more than two years.
Still, Asian refiners haven’t shown an increased appetite for Brent-linked Atlantic Basin crude, including much of the crude sold by West African producers such as Nigeria, Angola, and Congo, according to trading sources who spoke to Reuters.
Despite the plunge in Brent prices, Russian crude grade ESPO is still cheaper for Asian refiners than West African crude, traders say. Lower-priced Russian crude is eating into the market share of West African producers.
Russia also became the single largest crude oil supplier to China in January and February, overtaking Saudi Arabia, which was the number-one supplier of oil to China last year. As China accelerated the buying of cheap Russian crude oil at discounts to international benchmarks, Chinese imports of crude from Russia jumped by 23.8% year over year to 1.94 million barrels per day (bpd) in January and February 2023, per data reported by China’s General Administration of Customs. Russia beat Saudi Arabia to the top spot of Chinese crude oil suppliers as imports of Saudi crude fell by 4.7% to the equivalent of 1.72 million bpd, compared to 1.81 million bpd for the same period of 2022.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.