China, the global oil market’s lifeline this year, has stepped up purchases from exporters like Russia, the United States and Angola in recent weeks, while buyers elsewhere pare orders as coronavirus infections surge and fresh lockdowns are put in place.
China, the world’s largest importer of crude, is the only major buyer expected to see increased oil demand this year as the pandemic destroyed consumption globally.
With China’s imports expected to reach 12 million barrels per day next year, sellers are lining up shipments to retain market share as worldwide oil consumption is expected to fall by nearly 9% in 2020.
COVID-19 infections are rising worldwide, particularly in heavy fuel users like the United States and Europe.
For the last few months, that pushed the prices of key crude grades lower, allowing Chinese buyers to take advantage. The country is also ramping up commercial oil stockpiling, buying oil at low prices to increase reserves.
Premiums for ESPO Blend firmed to $2.90 per barrel above Dubai quotes this week, their highest since June, as trading of January volumes began. Russia’s Sokol crude cargoes loading in January also recently firmed to four-month highs.
Oil grades that have higher naphtha yields such as light, sweet U.S. crudes, are in higher demand from petrochemical buyers, one trader with an Asian refiner said. Light grades produce more gas oil, used for heating, which is also in greater demand, versus jet fuel, where consumption has collapsed.