Asia’s Physical Market for January Oil Gets Off to Strong Start

(Bloomberg) -- Asia’s physical oil market for barrels to load in January has gotten off to a strong start, with spot premiums of diesel-rich grades at the highest in nearly two years as the impact of the energy crisis lingers.

Spot differentials for Russian ESPO crude rose by 50 cents a barrel from the previous month, while the Sokol grade was more than $1 higher than the previous deal. Premiums for both varieties, which yield a high portion of diesel, were the highest since January 2020, data compiled by Bloomberg show.

Demand for Dubai-linked barrels in Asian rose, as arbitrage windows are still mostly shut due to Brent’s premium to Dubai oil lingering near the highest since 2013. Refiners are also keen to produce more diesel due to improved cracking margins and as the energy crisis, while easing, still boosts consumption of the fuel over winter, traders said. 

The strength in Asian spot prices -- mainly comprised of Middle Eastern and Russian barrels -- is likely to persist on healthy demand from refiners, according to traders. However, China’s moves to contain a resurgence in Covid-19 and its efforts to cut pollution ahead of the Beijing Winter Olympics in February will be closely watched, they said.

©2021 Bloomberg L.P.