The global oil market defies warnings as demand spikes


(Bloomberg) — Global oil markets continue to rage on weak demand prospects. Most recently, a closely monitored gauge of Asian crude oil consumption hit a seven-month low as a spate of virus cases in China led to lockdown-like restrictions at the world’s largest importer.

Read the most from Bloomberg

The premium of Oman futures on Dubai swaps fell below $1 a barrel on the Dubai Mercantile Exchange on Thursday. It is down almost 80% this month.

The oil market weakened in November, with much-watched statistics showing warning signs and futures prices falling. Among them, early spreads for both Brent oil and the main US-grade West Texas Intermediate have plunged into contango, a bearish price pattern pointing to near-term ample supply. As red flags spread, Brent futures fell to their lowest since January earlier this week.

Hopes for a recovery in Chinese oil demand are fading as daily Covid-19 cases hit record levels, prompting authorities to impose containment measures and curb movement. Amid the challenging conditions, some Chinese refiners are refraining from buying shipments of a preferred Russian grade, reducing demand as traders prepare to restrict Russian oil with EU sanctions from Dec. 5. Awaiting more details on the Group of Seven plan.

Brent futures posted a third weekly drop on Friday amid further signs from China that antivirus restrictions are tightening in major cities as authorities scramble to contain the Covid-19 outbreak. Beijing, the capital home to 22 million people, has begun a new round of restrictions, telling residents not to go outside.

The Oman futures-Dubai swap gauge, which fell below $1 a day in April, has typically yielded premiums of a few dollars since the invasion of Ukraine. It reached a high of $15 in March as many buyers began avoiding Russian oil, increasing the appeal of Middle Eastern crude and pushing premiums higher.

Also read  How UX research helps brands stay competitive in an increasingly saturated market

With physical trading closed this month for most cargoes to be loaded in January, spot premiums for core Persian Gulf qualities fell sharply. While China’s Rongsheng Petrochemical Co bought nearly 7 million barrels in the middle of the month, that wasn’t enough to boost sentiment, traders in those grades said.

Meanwhile, another physical market indicator — the intermonthly Dubai swap — reversed contango on Friday, signaling a bearish outlook for December through April, data from PVM Oil Associates showed. Before this week, the last time he was in Contango was in April 2021.

Brent was trading at $85.72 a barrel on Friday, its lowest level since January, after hitting $82.31 on Monday.

(Beijing adds details about the outbreak in the fifth paragraph.)

Read the most from Bloomberg Businessweek

©2022 Bloomberg LP




Leave a Comment