LONDON SINGAPORE Reuters -- Recent shifts in the relative price of different crude grades have given oil exporters the best chance of selling to top consuming regions in Asia, but sales have been sluggish as COVID 19 fears cool demand.
The Omicron coronaviruses variant has curbed oil consumption in Asia, as U.S. and West African sellers pinned their hopes on the changing market structure paving an easier path eastward than competing oil from the Middle East.
The global benchmarks for Brent and West Texas Intermediate crude last week were pummelled as tight supplies eased with U.S. strategic petroleum reserve https: www.reuters. Business energy what-is-is-Spr-emergency oil-stash biden-may-tap 2021 -- 11 -- 18 SPR sales and a decision by the Organization of Petroleum Exporting Countries and their allies to boost output https: www.reuters. The price of crude oil in Dubai fell to $2.56 a barrel last week, the lowest since March, making the export of Atlantic Basin crude oil grades more attractive for Asian buyers, according to traders and Refinitiv data. Brent-Dubai spread, Angolan Girassol crude, https: fingfx.thomsonreuters. com gfx ce lgpdwonamvo Pasted 20 image 201638861095531. png Sales of Nigerian and Angolan oil to India have picked up along with sales of U.S. WTI Midland crude to East Asia.
Angolan Girassol crude oil and Nigerian Qua Iboe have been offered on a free-on- board basis at robust premiums of $1.60 and $1.40 above dated Brent a barrel, which is still cheap compared to Middle East light grades. CRU TENDA CRU WAF We've seen an arbitrage window open, and demand from India and some markets further east has been encouraging in recent weeks, so that's keeping offers high, said one seller of West African crude oil.
The last few days the trading has gotten quieter. There's still a lot that isn't sure if new lockdowns will affect demand in the new year. With the March refinery maintenance season and refining margins coming off recently on Omicron fears, Asia's appetite might not be as robust as before.
Independent refiners have slimmer import quotas this year and state companies already well supplied, which would make Chinese buyers not easily tempted by more affordable barrels, according to traders.
In Shandong province, where most independents are based, ongoing tax investigations have curbed appetite for Brazilian and African oil in the world's largest importer.
There is a second SPR crude auction from eastern Zhoushan storage.
Offers for grades like Congolese Djeno have fallen to $2 a barrel above March ICE Brent for delivery into China, down from peaks of $3 a barrel premiums last month, said one East Asian buyer.
We've done most of our buying for the year. The market doesn't justify having some Atlantic basin crude now with the pandemic coming back, so the offers are just too high, and the market doesn't justify it, said a second buyer.
The Singapore-based trader said that the window is now only marginally open because of the U.S. SPR release, which initially weakened values of Atlantic Basin sour grades such as Mars crude and allowed some cargoes to be sold to Asia.
The spot discount for Mars hit its highest level in more than two months after WTI's discount to Brent widened, spurring U.S. demand for domestic crude. CRU C It was cheap but now it's not, and I'm not sure if any cargoes have been placed, another trader said. com gfx ce lbpgnlbwqvq Pasted 20 image 201638860656821. png