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(Bloomberg) — Asian crude buyers are likely to turn more to the spot market for cargoes after Saudi Arabia reduced pricing of its key grade by only half the amount forecast in a Bloomberg survey.
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At least two consumers benefiting from the kingdom’s source said they were thinking of reducing their consumption for the January cargo, according to refiners and investors interested in the market, who asked not to be identified because this data is confidential.
More refiners are likely to snap up physical cargoes from the Persian Gulf spot market where prices have fallen sharply this week, they said. Saudi and OPEC+ producers, which agreed last week to deeper output cuts, are also facing steeper competition from producers in the US and elsewhere that have an increased amount of crude to export.
Asia’s appetite for physical barrels, especially from the Middle East, has been relatively weak in recent months as India took large volumes of cheaper oil from Russia and Venezuela, and China faced increased pressure from shrinking refinery profits.
A key gauge of Asian crude demand — the premium of Oman futures against Dubai swaps — tumbled to the lowest in more than six months on Tuesday, according to data compiled by Bloomberg, indicating softening consumption in the upcoming cycle for February-loading cargoes.
Appointments are expected for the Saudi shipments on Wednesday and they will be informed of their allocations of deadlines until early next week.
–With Yongchang Chin’s.
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