Middle East crude continues to be a popular among Asian refiners

Oil buyers in Asia are increasingly turning to heavy sour crude essential oil grades from the center East, which therefore, have seen their value increase in accordance with light sweet crudes.

Energy markets have witnessed specific demand destruction in 2020 as a result of coronavirus pandemic, with S&P Global Platts Analytics forecasting that usage will drop by 8.5 million b/d this season, departing the global Dated Brent oil price in the upper $30s to lower $40s/b range.

However, crude grades are not homogenous and there are hundreds of different kinds, each with their personal qualities and characteristics.

Typically, the worthiness of a grade of crude oil is defined simply by the underlying value of the merchandise that are made when it's refined. The refinery yields of different crude grades and underlying refinery economics will be crucial in analysing the competitiveness of competing crudes in important consumer marketplaces such as Asia.

The international market has settled on using certain benchmarks, against which the value of crudes is measured.

Ideals for Platts Dubai, the center East sour crude benchmark assessment, have been supported in latest weeks by the ongoing tightness found in the sour crude complex.

Platts Dubai rose to a 1 cent/b superior to Cash Brent in the Singapore industry close on November 9. This signifies that the market is definitely valuing sour Middle Eastern crude above North Sea sweet crude, that your Brent benchmark reflects. In comparison, in 2019 Platts Dubai was assessed at a 74 cents/b low cost to Income Brent at the Singapore close.

The marketplace has seen a mixture of strong interest from Asian refiners to purchase crude - buoyed by a resurgence in the region’s important economies, especially India and China - and production cuts from the Opec + group.

Chinese demand has been particularly solid for Middle East sour crude grades, with barrels of Abu Dhabi’s Upper Zakum, Qatar’s Al Shaheen and Oman’s crude export blend - all deliverable crudes in to the Platts Dubai benchmark - recently purchased by the world’s most significant importer of crude oil. For example, China’s independent Rongsheng refinery is defined to expand its refinery potential and it's been seen buying crude cargoes before its expansion.

In addition, demand from Indian refiners for Middle East crude has picked up against a backdrop of bettering domestic gasoline margins.

Opec and its own members have complied with their production cuts lately, with some countries even reducing extra barrels as they need to compensate for previous over production.

The most recent Platts Opec+ survey for October implies that the group’s 10 non-Opec alliance members produced 34.40 million bpd in October, reflecting 100.2 % compliance with their quotas.

Meanwhile, Western benchmarks - Brent and WTI - remain under great pressure from poor refining margins, linked to weak refined product demand due to ongoing lockdowns and lowered movement over the Western Hemisphere.

In Europe, another round of lockdowns carrying out a rise in the quantity of coronavirus cases across a lot of the continent in October and November delivered additional shockwaves through crude markets. However, the consequences on fundamentals have been notably not the same as those seen previously this year.

This is mainly because of a rise in demand from Chinese and Indian refiners, who visit a mixture of West African and Mediterranean sweet crudes as more economically viable options.

While ideals for the Platts Dated Brent benchmark have found some support following great studies on coronavirus vaccine trials, rates remain fundamentally weak as essential oil product demand remains to be stuck on the trunk foot.

Oil markets are still vulnerable - and on a good net basis, Platts Analytics sees oil demand in 2021 appearing less than that of 2019. However, you will have winners and losers, and the high quality of Platts Dubai to different major essential oil benchmarks highlights the extent that heavier sourer grades of crude from the Middle East are in good demand from clients in Asia in a two-tier recovery.