Oil market review: Price cap agreed on Russian refined petroleum products

Oil benchmarks fell sharply last week with global economic concerns overcoming any positive upsides seen on account of the Chinese demand recovery, stable exports of Russian oil or the unexpectedly strong US employment data. The price however recovered on Monday and Tuesday, following supply outages and the price cap agreement on Russian refined products. After much deliberation, the G7 set a price cap of $100/bbl for Diesel, Gasoline and Jet fuel. For products that generally trade at a discount to crude oil, the price cap has been set at $45/bbl. The crude oil price cap is set to be reviewed in March 2023. The OPEC+ group decided to maintain the output levels as per existing agreements and take a more cautious approach to demand recovery. The next Joint Ministerial Monitoring Committee (JMMC) meeting is scheduled for 3rd April. The OPEC group's production fell in January as per a Reuters survey. The producer group's output fell 50,000 bpd to 28.87 million bpd. Decline in output from Iraq and no further increase in Nigerian output as compared to December were the primary drivers while the other Middle Eastern producers maintained compliance with the output agreement. Dubai swaps time spreads fell last week, in line with the weekly drop seen in other global crude oil benchmarks. The EFS spread narrowed through the week with the rout in the Brent benchmark being more severe. Saudi Arabia increased the official selling prices (OSP) for the month of Mar for most of the grades sold to Asia, betting on the demand improvement with China opening up. The flagship Arab Light grade OSP was increased by $0.20/bbl while for the Arab Heavy grade the increase was $0.50/bbl. ADNOC increased the Mar Official Selling Price of the Murban crude oil grade to $82.63/bbl as compared to the $80.11/bbl for February. MENA crude oil exports Weekly crude oil exports from the Middle East were higher at 130.8 million bbl while North African exports were seen lower at 13.9 million bbl. OPEC Secretary General on Monday sought validation of the group's decision to cut production in October, saying that the decision brought stability to the global markets. Speaking at the sidelines of an industry event in India he made the statements. This follows comments from Saudi Arabia's Energy Minister on Saturday that he remained cautious about any increase in production. Asian refining sector highlights Chinese independent refiners have shifted focus from crude to fuel oil feedstock material for their refineries with reports of blended Russian fuel oil proving to be not just economically attractive but also overcomes the requirement of having crude oil import quotas, which are privy to few refiners in the country. Taiwan's state refiner CPC Corp has scheduled the maintenance for a Crude Distillation Unit (CDU) at its Talin site from June till July. The unit has a capacity of 100,000 bpd. Another 150,000 bpd capacity CDU at the same site would be shut down in September-November while a 75,000 bpd CDU at the Taoyuan site would be closed in December-early Jan 2024 as per the company's spokesperson. The schedules are subject to change. (Writing by Sudharsan Sarathy; editing by Seban Scaria seban.scaria@lseg.com )

Oil market review: Price cap agreed on Russian refined petroleum products

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