Some Asian oil buyer are limiting spot purchases as Russia’s invasion of Ukraine upends the trading cycle in the world’s biggest crude-consuming region.
Typically around the start of the month, a flurry of trades would be been completed by now following the issue of official prices and also allocation of contracted crude from Middle Eastern producers. However, buyers seeking barrels for May loading are now having to deal with price fluctuations and changing supply given many are avoiding Russian crude.
Although some spot buy is taking place which goes at full swing during this is highly muted, said Bloomberg citing traders who participate in the market, asking not to be identified.
Buyers usually have until the end of the month t their purchases, but deals are often most active during the third week as they seek to secure spot cargoes to be shipped in 2 months.
Besides prices buyers are also considering quality of crude as crack spread also fluctuating. Russia is a major producer of diesel and supply cut back from Russia has driven demand upwards for the field, making crude that yields more diesel when processed much more attractive to refiners.
Middle Eastern suppliers are the logical option for buyers seeking additional oil after the disruption to Russian flows, and that’s pushed up spot differentials of Persian Gulf grades such as Qatar’s Al-Shaheen to the highest since at least 2014.
Thailand’s PTT didn’t award any cargoes in a monthly tender seeking sour grades for May loading that closed earlier this week, a rare move by the company. Declining spot differentials and volatility in profit margins from turning crude into fuels are some of the reasons behind the decision to pause purchases, traders said to Bloomberg.
