By Sergey Manukov
In recent weeks, the same picture has been observed everywhere: the demand for oil is growing, and growing strongly, and with it the prices of oil itself are growing, which have already come close to $90 per barrel of Brent oil.
Differentials for spot tankers from the Middle East have risen sharply in recent days thanks to Chinese traders actively buying up "black gold". The number of applications for oil from the North Sea has also risen sharply. Asian buyers are buying millions of barrels of US oil despite prices climbing to a 6-month high last week.
Increased in recent weeks and the profits of oil refiners. Asian refineries and companies that buy oil from Russia at a hefty discount and sell oil products at market prices have been especially successful. The International Energy Agency (IEA) announced last week that oil demand rose to a record high in June and that demand will continue to grow in general until the end of this year.
In July and August, Brent oil in London has risen in price by almost 20%. The rally in the oil markets was provoked by Saudi Arabia (KSA) and Russia, which extended their voluntary production cuts. This led to an increase in the imbalance between supply and demand in favor of the former.
“The main reason for the imbalance (between supply and demand) is Riyadh’s decline in production,” Giovanni Stanovo, an analyst at UBS Group AG, explains to Bloomberg. “Demand is consistently high in the US and large regions of Asia, and in Europe it is mostly mixed.”
The Refining giant China's Rongsheng Petrochemical Co. bought millions of barrels of oil from the spot market last week. And that's not counting the 40 percent increase that Chinese refineries will receive from the KSA in September.
Asian refineries have already bought approx. 40 million barrels of oil for delivery in November. So, the activation in the spot oil market, which began in July, continues.
The premium for benchmark Middle Eastern oil, the Murban brand, which is produced in Abu Dhabi, also soared. On Monday, it rose on the stock exchange in Abu Dhabi, according to PVM Oil Associates, to almost $3 per barrel, up 30 cents, i.е. 10% higher than at the beginning of the month. At the beginning of the exchange session, the price of more sulphurous and dense oil of the Upper Zakum brand also increased.
The rally was fueled by declines in oil production by OPEC countries and their allies under the OPEC + agreement, as well as the steady increase in prices by Riyadh. It was facilitated by not very serious problems with production in many areas, from Nigeria to Kazakhstan.
The decline in production by the participants in the OPEC + agreement and the subsequent increase in prices led to an increase in the price of medium-sour Norwegian oil. This, in turn, caused a decrease in the pace of sales in Northern Europe and forced a number of buyers to look for cheaper oil. But despite this, oil grades such as Forties, which is included in the basket of oil grades for Dated Brent, continued to rise in price. Forties sold for an 85 cent premium over Dated Brent. On July 31, this discount was 35 cents.
Of course, in a few months the price of oil will go down again, because American refineries, second only to China in terms of volume of produced oil products and oil purchases, will soon reduce production.