Asian buyers boost physical oil as pandemic punishes futures

By Olga Yagova and Noah Browning
MOSCOW/LONDON, Oct 29 (Reuters) - Robust demand from China
and India has bolstered physical crude oil prices from around
the world, traders said, in contrast to the futures market that
is wrestling with over-supply and demand uncertainty wrought by
COVID-19.
Global benchmark Brent futures LCOc1 are trading around
$40 a barrel, having recovered from more than two-decade lows in
April, but still under pressure from concerns a second wave of
the pandemic will reduce fuel use.
On the more buoyant physical markets, China's state and
independent refiners are the keenest buyers as they fill
early-2021 import quotas and as port congestion that has clogged
traffic for much of the year has eased.
Their activity has helped to lift differentials in the last
two weeks for Russian Urals, Norway's Johan Sverdrup, Caspian
Azeri BTC and CPC Blend, as well as West African and Brazilian
grades. "China is again a hope for oil suppliers. Unlike Europe that
is currently in the middle of the pandemic crisis, it seems to
be the quickest to restore its economy," a source in a global
trading firm told Reuters on condition of anonymity.
Russian Urals achieved the highest premiums to dated Brent
in three months and oil arbitrage shipments to China may
increase soon, two traders said, especially for cargoes loading
at the end of November and in December.
BP plans to ship the first supertanker of Urals to China
since June. "China has been nearly absent from the Mediterranean oil
market," a trading source told Reuters. "Now it is back, asking
questions and definitely considering buying for volumes loading
from end-November and later."
India has also boosted sentiment. Crude oil processing by
Indian refiners reached the highest in six months in September,
helping the differential for light, sweet Nigerian oil to rise
to a premium to dated Brent from near a 50 cent discount.
"China and India are the answer," said one trader for a
refinery in Europe, where poor margins and a stalled economic
recovery have meant crude grades the continent usually favours
are heading east.
Chinese buying had pushed Angolan Dalia crude from parity
with dated Brent early last month to plus 75 cents, the trader
said, and also boosted Brazilian crude.
But the pandemic gloom could mean the uptick is brief and
the physical strength may fail to make its way into futures
prices. Benchmarks for Oman and Dubai crude, which are
traditionally bound for Asian markets, slipped on Wednesday, in
a sign of cooling demand.