Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Global crude market finds support mainly from China demand

CommoditiesNov 19, 2020 07:46AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
4/4 © Reuters. FILE PHOTO: Oil tankers pass through the Strait of Hormuz 2/4

By Devika Krishna Kumar, Olga Yagova and Noah Browning

NEW YORK/MOSCOW/LONDON (Reuters) - China, the global oil market's lifeline this year, has stepped up purchases from exporters like Russia, the United States and Angola in recent weeks, while buyers elsewhere pare orders as coronavirus infections surge and fresh lockdowns are put in place.

China, the world's largest importer of crude, is the only major buyer expected to see increased oil demand this year as the pandemic destroyed consumption globally.

With China's imports expected to reach 12 million barrels per day (bpd) next year, sellers are lining up shipments to retain market share as worldwide oil consumption is expected to fall by nearly 9% in 2020. (Graphic: Global oil demand by region during Q2 and Q3 2020, https://fingfx.thomsonreuters.com/gfx/ce/azgpojbjrvd/GlobalOilDemandQ2Q3.png)

This week, Royal Dutch Shell Plc (L:RDSa), Russian Lukoil's (MM:LKOH) trading arm Litasco and Unipec, the trading arm of China's state-owned Sinopec (SS:600028), have provisionally booked, or are looking to book supertankers to ship U.S. crude from the Gulf Coast to Asia in December, according to shipbrokers and Refinitiv Eikon data.

COVID-19 infections are rising worldwide, particularly in heavy fuel users like the United States and Europe.

For the last few months, that pushed the prices of key crude grades lower, allowing Chinese buyers to take advantage. The country is also ramping up commercial oil stockpiling, buying oil at low prices to increase reserves.

The International Energy Agency said last week that China was on track to be the only major country to boost its demand for oil year-on-year. It estimates global demand at 91.3 million bpd in 2020, down from 100.1 million bpd in 2019.

"Lockdowns will probably be in place in Europe for much of this winter. China has raised its quotas and (storage) capacity. It looks like the demand will be centered there in the near future," a trader at a European refiner said.

The premium for Russian January-loading ESPO Blend crude, one of the most popular grades for Chinese independent oil refiners, is at five-month highs.

U.S. crude grades are rebounding as well, with WTI in East Houston climbing to its highest in about two months this week. U.S. grades have been pressured due to a 12% drop in domestic fuel demand and as new COVID-19 infections hit daily records.

These come on the back of firmer Middle East crude prices, which makes up the baseload of Asia's demand. This week, Qatar sold January-loading al-Shaheen crude at the highest premiums in four months.

"Chinese demand is more visible now," one trader in the Russian Far East crude oil market told Reuters. "Trading firms are very active as they expect more requests from China's independent oil refiners that will buy oil under new import quotas."

A Chinese buyer said traders were offering U.S. crude, North Sea Forties and West African grades as they expected arbitrage economics to improve after sharp gains in Middle East prices. (Graphic: China crude oil imports by region, https://fingfx.thomsonreuters.com/gfx/ce/gjnpwbljrvw/ChinaOilImportsbyRegion.png)

Premiums for ESPO Blend firmed to $2.90 per barrel above Dubai quotes this week, their highest since June, as trading of January volumes began. Russia's Sokol crude cargoes loading in January also recently firmed to four-month highs.

Oil grades that have higher naphtha yields such as light, sweet U.S. crudes, are in higher demand from petrochemical buyers, one trader with an Asian refiner said. Light grades produce more gas oil, used for heating, which is also in greater demand, versus jet fuel, where consumption has collapsed.

One senior Chinese trader said heavier crude grades, such as in West Africa, were seeing less robust demand. In Angola, Africa's second biggest crude exporter, heavier grade Dalia is trading at a lower premium than medium grades Cabinda and Girassol, which were at multi-month highs.

Global crude market finds support mainly from China demand
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
New Jazenevd
New Jazenevd Nov 19, 2020 8:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China works, West talks with occasional bursts of whining.
Andrew Allen
Andrew Allen Nov 19, 2020 8:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
you have triggered me, but you are right lol
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email