Falling spot premiums prompt Asian refiners to buy Middle Eastern oil

SINGAPORE, Dec. 17 (Reuters) – Indian and Chinese oil buyers source crude from the Middle East after spot premiums for cargo cargoes in February fell by more than half to their lowest of three months due to improved supplies to Asia.

Mitigation of concerns about the impact of the novel variant of the Omicron coronavirus on fuel demand in Asia is also supporting Asian refiner margins, business sources said.

“It’s a pretty busy week as demand has come out,” said a Singapore-based analyst from a trading company.

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Supplies to Asia are improving as price differences in crude grades make Atlantic Basin crudes more attractive. Read more

The Organization of the Petroleum Exporting Countries and their allies also agreed to continue increasing production by 400,000 barrels per day in January.

The drop in cash premiums comes after hitting multi-year highs for cargo loaded in January.

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India’s Reliance Industries Ltd (RELI.NS) bought 4 million barrels of supply from Abu Dhabi Das this week, while the main refiner Indian Oil Corp (IOC.NS) closed a tender for the crude acid.

The demand for fuel for the world’s third largest importer and consumer of petroleum is robust with the recovery of industrial activity. Diesel sales, which account for about two-fifths of India’s overall refined fuel consumption, jumped nearly 18% in the first half of December compared to the same period in November. Read more

In China, Rongsheng Petrochemical (002493.SZ), the trading arm of leading private refiner Zhejiang Petrochemical, bought 1 million barrels of Upper Zakum from Abu Dhabi last week and is looking to source this week. The refiner also bought at least 2 million barrels of Emirati and Iraqi crude for delivery between February or March and December.

Another Chinese mega-refiner, Hengli Petrochemical (600346.SS), took three of the four cargoes of Qatari al-Shaheen crude in Qatar Energy’s tender, while the rest of the cargo went to Japan’s premier refiner. ENEOS Holdings (5020.T). Read more

But there has been less appetite from independent Chinese refiners who have been hit by restrictions on import quotas, increased scrutiny of tax evasion and investigations into unapproved refining units in the region. Shandong province. This brought Russian crude ESPO spot premiums down to their lowest level in four months.

“Last month’s premiums were too crazy and unsustainable,” said a Singapore-based trader, adding that prices were set to correct after refining margins collapsed late last month.

The sources declined to be named because they are not authorized to speak to the media.

Profitability of Asian refiners improves as margins rebound after falling to their lowest level in 4 months at the end of November

Complex refining margins in Singapore, an indicator of the profitability of Asian refiners, hit a four-month low at $ 2.15 a barrel in late November amid fears about Omicron’s impact.

They have since rebounded to around $ 6 a barrel.

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Reporting by Florence Tan; Editing by Edwina Gibbs

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