|17 February, 2020

Middle East Crude-Benchmarks edge up; Teapots return to spot market

Middle East crude benchmarks Oman and Dubai edged up on Monday

SINGAPORE- Middle East crude benchmarks Oman and Dubai edged up on Monday as concerns over falling demand caused by the economic fallout from the coronavirus outbreak in China were offset by expectations that output cuts from major producers will tighten crude supply.

Several Chinese independent refineries, or teapots, as the industry calls them, have snapped up crude supplies after prices slumped, betting that they are bottoming out and China's demand could recover from the virus outbreak in the coming months.

The refineries were absent from the market for weeks since the Lunar New Year holiday of late January, eight sources familiar with the matter said. 

Rongsheng Petrochemical has bought 2 million barrels of Oman crude and 1 million barrels of Upper Zakum crude for loading in April via a spot tender from a few suppliers, traders said on Monday. 

ASIA PACIFIC CRUDE

Australia's BHP Group Plc sold a cargo of Pyrenees crude loading April 11-15 at a premium of just over $21 a barrel to dated Brent via a spot tender, well below the last traded level, three trade sources said on Monday.

Indian oil explorer ONGC Videsh has sold one cargo of Russian Sokol crude SOK-DUB loading April 17-23 at a premium of around $4 a barrel to Dubai quotes, two trade sources said on Monday. 

Premiums for Russia's ESPO Blend crude oil fell to their lowest levels in two and a half years as demand from China, the main buyer of the grade, collapsed. Russia's Surgutneftegaz awarded four cargoes of ESPO Blend crude loading in the first half of April at premiums from $2 to $2.30 per barrel to Dubai quotes. 

NEWS

Kuwait and Saudi Arabia will start trial oil production from the jointly operated Wafra and Khafji oilfields on Sunday, Kuwait's oil minister said. 

Several top trading houses have rented millions of barrels of crude storage in South Korea this month to hold excess oil supplies after the coronavirus outbreak dampened demand in China, the world's largest importer, trading sources said. 

A sustained drop in oil prices to $40 a barrel as the world weans itself off fossil fuels would cut Gulf exporters' sovereign ratings by two notches over time, leaving the average credit score just above 'junk', S&P Global said on Sunday. 

A contractor working at Shell's Pulau Bukom manufacturing site in Singapore has contracted the new coronavirus, the company said on Friday, as the city-state reported its biggest jump in new cases so far. 

Oman's production of crude oil and condensates was 958,270 barrel per day in January, the state news agency said on Saturday. 

Russian largest oil producer Rosneft has pledged to invest around $5 billion in environmentally friendly projects over the next five years, the company said on Monday.

A growing oil glut in Russia and the promise of a flood of dollars from the sale of a leading bank are strengthening the case for Russia to cut oil output in tandem with OPEC, oil sources said.

Money managers cut their bullish bets on U.S. crude futures and options in the latest week as oil prices touched 13-month lows, according to a weekly government report on Friday. 

(Reporting By Shu Zhang; Editing by Shounak Dasgupta) ((shu.zhang@thomsonreuters.com; +65-6870-3549; Reuters Messaging: Twitter @shuzhang4))

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