Commodity trading houses and oil majors are scrambling to find spot buyers for crude oil outside China, where demand is depressed because of the coronavirus outbreak and where some buyers are asking to delay buying, Asia-based traders told Bloomberg on Tuesday.
Cargoes of grades ranging from Russia’s ESPO to Brazil’s Lula to Iraq’s Basra Light are being offered for delivery in a few weeks time, an unusual pattern because they would have already been traded weeks ago, according to the traders who spoke to Bloomberg.
Buyers in Asia are not too enthusiastic to snap up spot cargoes, because refining margins are weak. One potential beneficiary of the depressed crude trading market in China could be India, where refiners see opportunities in buying prompt cargoes.
China’s oil demand amid the coronavirus outbreak is likely inflicting the worst oil demand shock to markets since the financial crisis of 2008-2009, with Chinese demand plunging by 20 percent compared to the typical demand for the season, sources with inside knowledge of the Chinese industry told Bloomberg earlier this month.
China’s refiners are awash with an oversupply of refined petroleum products—gasoline, diesel, and jet fuel—as the Lunar New Year holiday was extended, economic activity has slowed down, and people are either discouraged or outright banned from traveling long distances by airplanes, cars, buses, or trains.
Sinopec, the largest oil refiner in Asia, is cutting its refinery production by 600,000 bpd in February, due to decreased fuel demand amid the raging coronavirus outbreak, four sources familiar with the plans told Reuters on Monday.
China’s independent refiners were expected to cut refinery throughput more significantly because they are not allowed to export fuels, unlike the state-held corporations. Independent refiners in China’s Shandong province in the east have already cut refinery runs by as much as 30-50 percent and are now said to operate at less than half of their refining capacity, according to Reuters’ sources.
By Tsvetana Paraskova for Oilprice.com