Global oil market flashes warnings


Oil markets have weakened in November, with a host of widely-watched metrics flashing warning signs and dragging futures prices lower.

THE global oil market keeps sending up flares on the outlook for weaker demand.

In the latest, a closely-watched gauge of Asian crude consumption tumbled to a seven-month low as surging virus cases in China trigger lockdown-like restrictions in the world’s biggest importer.

The premium of Oman futures over Dubai swaps fell below US$1 (RM4.50) a barrel on the Dubai Mercantile Exchange on Thursday. It’s plunged about 80% this month.

Oil markets have weakened in November, with a host of widely-watched metrics flashing warning signs and dragging futures prices lower.

Among them, the prompt spreads for both Brent crude and leading US grade West Texas Intermediate have dipped into contango, a bearish pricing pattern that indicates ample near-term supply.

As the red flags proliferate, Brent futures declined to their cheapest price since January earlier this week.

Expectations for a recovery in Chinese oil demand are fading as daily Covid-19 cases have hit record levels, spurring officials to step up containment measures and movement curbs.

Amid the challenging backdrop, some Chinese refiners are refraining from buying cargoes of a favoured Russian grade, cutting demand just as traders wait for more details on a Group of Seven plan to cap Russian oil alongside European Union sanctions that start on Dec 5.

“The fact that Dec 5 is not injecting any premium suggests the market is sanguine there will be no major supply disruption, at least nothing on a sustained basis,” said Vandana Hari, founder of Vanda Insights in Singapore.

Brent futures headed for a third weekly drop yesterday amid further signs from China that anti-virus restrictions in key cities are multiplying as officials seek to quell Covid-19 outbreaks.

In Beijing, the capital that’s home to 22 million people, there’s been a fresh round of curbs, with residents asked not to leave.

The Oman futures-Dubai swaps gauge, which slipped below US$1 (RM4.50) for one day in April, has mostly commanded multiple-dollar premiums since the invasion of Ukraine.

It spiked as high as US$15 (RM67.50) in March as many buyers started shunning Russian oil, raising the appeal of Mideast crude and boosting the premium.

With physical trading this month mostly concluded for January-loading cargoes, spot premiums for key Persian Gulf grades have declined sharply. — Bloomberg

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Globaloil , Omanfutures , Brent , WTI , China , Russia

   

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