Asian oil buyers fret over margin impact of canceled OPEC+ meeting


Article content

SINGAPORE — Crude oil buyers in Asia are concerned that an unexpected cancellation of an OPEC+ meeting to discuss a rise in output could drive oil prices even higher and hurt their margins.

They are now awaiting Saudi Arabia’s official selling prices (OSPs), which were delayed until after the OPEC+ meeting and set the tone for prices of a majority of Middle East crude sales to Asia, to assess the oil market’s direction.

Brent crude oil prices rallied to above $77 a barrel, the highest since 2018, on Monday, after ministers of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, called off oil output talks and set no new date to resume them.

Advertisement

Article content

“The OPEC no decision and resulting high price will have short-term negative impact on Chinese refiners, as they will see margins pinched due to often lagging domestic fuel prices,” a Singapore-based crude oil trading executive familiar with Chinese refineries’ thinking said.

“That could force them to cut runs, which should lift margins again and bolster their crude oil buying,” the source added. China is the world’s second largest oil consumer and top overall importer.

The talks were canceled following a clash between top producer Saudi Arabia, which wants to maintain output curbs, and the United Arab Emirates, which has pushed for increased output.

No date has been set for the next OPEC+ meeting, which has left some sources speculating there would be no output increase in August while others expect the group to convene a new meeting within days in order to secure an agreement.

Advertisement

Article content

Still, buyers in Asia are optimistic the row will be temporary.

“Buyers would like prices to be reasonable and early release of additional barrels will help us … this is more of a temporary phenomenon and would settle eventually,” a source with an Indian refiner said.

For now, Asia’s physical crude market remains adequately supplied even as global fuel demand gradually recovers from the coronavirus pandemic, refining sources said. Asia is the top oil consuming region, accounting for roughly 37% of world use.

The near-term impact on Asia’s physical market would only be marginal even if OPEC+ had agreed to increase volume, because the proposed output rise appeared to be only 400,000 barrels a day, said a source with a Japanese refiner.

Advertisement

Article content

In the absence of clarity, end users are now closely monitoring the release of OSPs from Saudi Aramco for clearer signals on the direction of the physical market.

Saudi crude OSPs, which are typically released around the fifth day of each month, have been delayed due to the breakdown of OPEC+ talks, the sources said.

Saudi OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affect more than 12 million barrels per day (bpd) of crude bound for Asia.

“The fact that Saudi OSPs still have not been released means that Saudi is still making efforts for talks with ADNOC. The Saudis normally wait till the market becomes clear before they announce the OSPs,” said the source at a North Asia refinery.

(Reporting By Shu Zhang and Chen Aizhu in Singapore, Nidhi Verma in New Delhi and Yuka Obayashi in Tokyo; writing by Jessica Jaganathan; Editing by Simon Cameron-Moore and David Evans)

Advertisement

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

    Comments

    Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



    Source link

    Latest

    ED Problems: Do You Have Erectile Dysfunction?

    Do you have Dysfunction the same energy you used to have in your 15s? Would you have the option to play "soccer as fast...

    Panasonic defends $7bn Blue Yonder deal after questions over price

    Panasonic has a chequered history in acquisitions but the Japanese conglomerate insists its $7.1bn purchase of Blue Yonder is worth the steep price...

    Best Home Remedies For A Flawless Skin

    Flawless skin is what everyone dreams of today. No man or woman prefers to have dull and acne-prone skin as grooming of our skin...