(Bloomberg) — Physical oil prices firmed in Asia after a flurry of tenders this week, although concerns remain about possible near-term demand weakness after a flare-up in Covid-19 cases across China.
While the buying is part of the normal monthly procurement of crude cargoes, their issuance in close succession and so late in the trading cycle provided a short-term lift to sentiment amid uncertainty surrounding demand. China is tackling a virus resurgence as the Lunar New Year holidays near and some refineries across Asia will undertake planned maintenance in March and April.
See also: China’s Virus Flare-Up Before Holiday Stokes Oil Demand Fear
Key Middle Eastern crude grades such as Abu Dhabi’s Das Blend and Murban had been trading at discounts to official selling prices prior to the tenders hitting the market this week. Sentiment improved after refiners from India, Thailand and China sought barrels for March loading or April delivery. Near-term supply is also expected to tighten after Saudi Arabia pledged deeper output cuts.
PTT Pcl, Thailand’s state oil company, purchased Das for March loading at a premium to the grade’s official selling price on behalf of IRPC, and Rongsheng Petro Chemical Co. bought 4 million barrels of Oman and Das crude. Indian Oil Corp. and Japan’s Cosmo Oil Co. also acquired the Abu Dhabi grade.
Some sellers were offering March-loading cargoes of Abu Dhabi’s Murban at a premium of about 10 cents a barrel to its official selling price as of Thursday, compared with a deal done at a steep discount last week. Spot differentials of Russian ESPO, a favorite among Chinese buyers, also improved slightly.
In another sign of support, backwardation widened for the timespreads of inter-month Dubai swaps. February-March timespreads were 20 cents a barrel in backwardation on Thursday, compared with 5 cents on Monday.
Russia’s flagship Urals, meanwhile, got a boost in Europe as buyers looked to secure supplies following Saudi Arabia’s output cuts. Urals was last bid at a slight discount of 15 to 30 cents a barrel to Dated Brent, the highest in almost two months, said traders monitoring an S&P Global Platts pricing window.
