Middle Eastern Oil is Favoured as Benchmarks Diverge

Strong global demand in surging oil prices set crudes from the Middle East off to a strong start the month as a major divergence in global benchmarks favours grades priced off Dubai oil.

According to Bloomberg estimates Oman crude for loading in April was pegged at about $4 a barrel over Dubai prices. That’s up from late last month, when premiums averaged about $2.70. Traders claim interest in Dubai-linked cargoes has risen due to their discount to benchmarks such as Brent and West Texas Intermediate, which most European and American grades are priced off.

Oil futures have soared to the highest level in seven years in the opening weeks of 2022, building on last year’s rally, as energy consumption recovers from the impact of the pandemic.

The widening differential offers Middle Eastern crudes an edge in increasingly buoyant market, in mid-December Brent, the most important global oil benchmark, was about $2.50 barrel more expensive than Dubai crude swaps; now that’s expanded to more than $4.50.

The equal market place forces which have lifted futures have additionally boosted the rate of near-term barrels relative to later-dated ones, a bullish pattern called backwardation.

That works to the benefit of providers from the Middle East looking for income in Asia given the shorter distances that want to be covered.

Arbitrage flows of WTI Midland, for example, at the moment are much less appealing to Asian buyers because of the steep backwardation, traders said. Long-haul cargoes from North America or the North Sea take near months to sail to Asia and are much less appealing for dealers than prompt sale to customers nearby.

Asian oil investors additionally referred to wholesome refining margins for gas and gasoil, and their effect on lifting universal processing earnings and probable run rates amongst regional refiners.

Global gasoline charges are growing quicker than the recovery in crude, with the whole lot from motor to business gas online leaping as economies and borders reopen, coupled with lower product exports from China.

News Source: Gulf Business