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As oil demand in Europe and the US continues to disappoint, refineries in Asia are rushing to buy crude from around the world, giving the oil market some hope that at least in one region demand is strengthening in the fourth quarter.
Longer-term supplies from leading OPEC producers due to OPEC + cuts, new import quotas for independent refineries in China, and strengthening fuel demand in India have combined to create a bidding war for crude oil types from all over the world headed to Asia in early 2021, traders told Bloomberg.
Rising crude oil demand pushed the Russian ESPO blend price for January loading to the highest premium over the Dubai benchmark in five months. ESPO is very popular with refineries in China and Japan, but Chinese refineries are also buying cargoes from Angola and Brazil, according to traders who spoke to Bloomberg. Japan and South Korea are also buying more cargoes from Qatar and the US.
Some of the increased purchases are due to the fact that the main producers and exporters in the Middle East, Saudi Arabia and Iraq, have recently reduced forward supplies to their customers. Related: Oil prices under pressure as oil and gasoline stocks rise
Demand in Asia is also supported by India, which sees a recovery in fuel demand that has increased year-on-year in October for the first time since February.
Shipbrokers told Reuters oil trading units from major oil companies, including Shell and China’s Sinopec, have been looking to book supertankers to send US crude oil from the Gulf coast to Asia next month. This pushed the price of the West Texas Intermediate at the Magellan East Houston WTI-MEH to its highest in two months, according to Reuters data.
Demand in China and the wider Asian region is currently the only bright spot on the oil market as demand remains depressed in major developed economies in Europe and the United States, which are grappling with an increase in COVID-19 infections.
By Josh Owens for Oil “
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