Oil Refiners Hold Out for Price Cuts After OPEC+ Output Deal

Oil refiners in Asia stayed on the sidelines on Monday as they awaited price cuts to spot cargo offers after the OPEC+ deal to boost output.

Offers for Russian ESPO and grades such as Johan Sverdrup made late last week were expected to dip after the pact by the cartel, amid concerns over muted interest by Chinese private refiners and the spread of Covid-19’s delta variant. This month, sales for Russian ESPO began on a weaker note, with premiums falling as much as 80 cents a barrel from previous sales, according to executives with trading houses and refiners, who asked not to be identified.

Activity in the Middle Eastern spot market remained lackluster at the start of the second week following the release of official selling prices. Spot crude buy tenders by key importers such as from China’s Rongsheng Petrochemical Co. Ltd. were not yet seen, after Indian Oil Corp. emerged as one of the few active buyers, with its purchase of Iraqi-to-North Sea crude last week.

Traders expect OPEC+ producers to offer prompt August-loading shipments to existing long-term customers or equity holders, or stash the barrels away in tanks for later sales. So far, Asian refiners that Bloomberg contacted had not been asked to take any immediate cargoes.

Global benchmark Brent lost as much as 1.7% on Monday after Sunday’s deal for a 400,000 barrel-a-day increase each month from August. Goldman Sachs Group Inc. warned near-term prices may gyrate amid concern about the delta virus variant, despite the deal being supportive of its constructive view on oil.

©2021 Bloomberg L.P.

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