Oil benchmarks started the week positively, with China opening borders for travel, effectively ending the zero-COVID-19 policy that had been in place.

This move is expected to open the pent-up air travel demand from the country with airlines gearing up for the demand rush. This also coincides with the Lunar New Year, which is also seasonally a high demand period.

Saudi Arabia announced the official selling prices (OSPs) for crude oil sales in Feb, cutting the differential of benchmark Arab Light to Asia to a 15-month low.

Arab Light differentials were dropped to $1.8/bbl, a m-o-m decrease of $1.45/bbl. The Arab medium and Arab heavy grade differentials were cut by $1/bbl each while the Extra Light grade differential was cut by $2.9/bbl.

Similarly, OSPs for all grades to Europe were cut in the range of $1-1.8/bbl. ADNOC lowered the Feb Murban OSP to $80.11/bbl from $90.90/bbl in Jan. Iraq's SOMO dropped the Feb OSP for Basrah Medium crude to Asia by $0.90/bbl. The Basrah Medium OSP for sales to Europe was increased by $0.95/bbl m-o-m.

Dubai time-spreads fell last week, with economic recession fears driving the market down. But the opening of Chinese borders and expected return in demand from the country should support key benchmarks and spreads.

OPEC production was seen higher in December on the back of stronger production from Nigeria according to a Reuters OPEC survey.

Production from the group was seen at 29 million bpd, 0.12 million bpd higher m-o-m. The OPEC-10 members produced 0.78 million bpd lower than their target.

Asian refining sector highlights

The Nghi Son refinery in Vietnam is expected to have a 20-25% reduction in output in the first decade of January considering the leak in the RFCC unit. China is reported to have announced the first batch of product export quotas for refiners with 17.06 million MT of quota to the state-run refiners. The quota was higher than the one issued last year for similar time period. 

MENA crude oil exports

Weekly crude oil exports from the Middle East were lower at 118.1 million bbl while North African exports were seen higher at 18.2 million bbl.

Chinese refiners are reported to have snapped up multiple cargoes of Kazakhi exports and also shown interest in the Johan Sverdrup crude oil, bidding up the prices for the grades.

While these grades were seen by European refiners as primary post-Russian sanction feed to refineries, this new competition would mean European refiners might have to end up paying more or buy more from the Middle East.

(Writing by Sudharsan Sarathy; editing by Seban Scaria)
(seban.scaria@lseg.com)