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Unipec, the trading unit of the top Chinese and Asian refiner, Sinopec, is selling unusually large volumes of Oman crude for August loading to other trading firms, in a sign that demand in China could be weaker than thought, according to trade sources and data Reuters has compiled.
The large ongoing sale of millions of barrels of Omani crude has kept the Dubai benchmark price, the benchmark for Middle Eastern crude going to Asia, in check in recent days, despite the expected tightening of the oil market in July when the Saudi production cut of 1 million barrels per day (bpd) will take effect.
Unipec began selling large volumes of Omani crude – larger than usual – on June 1, before the OPEC+ meeting at which the group extended the current cuts into 2024 and the Saudis said they would unilaterally cut 1 million bpd in July. Unipec has sold cargoes of a total of 8 million barrels since the beginning of this month, to the trading units of TotalEnergies and Shell, as well as to trading house Trafigura and PetroChina Hong Kong, per the data Reuters has compiled.
Refining margins in China have weakened due to a slower-than-expected rebound in the Chinese economy, traders and analysts told Reuters.
At the same time, China’s refiners have increased purchases of crude from regions other than the Middle East, including from the U.S., Brazil, West Africa, and cheap crude from Russia, they added.
These could be the reasons for an unusually large batch of Oman’s crude being marketed by the trading arm of China and Asia’s top refiner.
After the OPEC+ meeting, Saudi Arabia raised the official selling price (OSP) for its flagship grade Arab Light for Asia by $0.45 per barrel to a premium of $3.00 over the Oman/Dubai average. Other Middle Eastern producers typically follow the trends in Saudi pricing for their own cargoes going to Asia.
Some Asian refiners are said to be looking to buy spot crude oil cargoes from Russia, Africa, Brazil, or the United States after the Saudis unexpectedly raised its OSP for its crude going to Asia in July.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com