Oman emerges as unexpected beneficiary of OPEC crude oil output cuts amid Chinese demand
The Oman crude complex has strengthened to a more than two-month high against Dubai on the back of strong demand from Chinese independent refiners, which recently received their crude import quota for 2017, traders said Wednesday.
The spread between the front-month Oman cash assessment and Dubai assessment widened to 79 cents/b at Tuesday’s Asia close, the widest since November 30 when it was 80 cents/b.
It was assessed at a premium of 78 cents/b to front-month cash Dubai assessment on Wednesday, S&P Global Platts data showed.
For the month-to-date, Oman commanded an average premium of 58 cents/b over Dubai, more than double the average of 25 cents/b in January.
Bigger cuts by most OPEC members may have pushed some buyers to take Oman crude cargoes instead, according to trade sources.
A production cut of only 45,000 b/d was expected from Oman, less than 10% of that expected from Saudi Arabia.
Oman crude is easier to get, a Singapore-based trader said, attributing its attractiveness to its relative abundance.
“Demand for Oman [crude is] still firm, especially from the Chinese independent refineries,” another trader in Singapore said.
With ESPO, another independent refineries’ favorite, holding strong at premiums of $3.50-3.60/b to Platts front-month Dubai assessments as seen in recent trades, Oman serves as an attractive alternative, traders said.
The Chinese Ministry of Commerce officially issued the 2017 crude import quotas to approved independent refineries in mid-January, opening the gates for a rush of buying as they ran low on feedstocks by end-2016, traders said.
Imports of Oman crude by Chinese independent refineries amounted to about 1.4 million mt in December, while January intake of the grade halved to 720,000 mt, according to cFlow, S&P Global Platts trade flow software.
Inflow is expected to rebound strongly for April-arrival cargoes, which had traded in January-February.