This article reviews the relative performance of major global benchmark futures and iconic crude oil futures as economies around the world emerge from the impact of the COVID-19 pandemic at different speeds.
Oil prices rebound
in 2021 Oil prices have generally been on an upward trend for most of the year. Economic recovery and the resulting rise in demand, coupled with supply management by the OPEC+ alliance, have re-established a balance between supply and demand.
Among the major global benchmark futures contracts, the combined price of DME Oman crude oil futures is approximately US$70 per barrel, while North Sea Brent crude futures are priced higher than Oman crude and the U.S. WTI benchmark.
Brent crude oil and WTI crude oil are classified as light sweet crude oil, while Oman crude oil is classified as medium-sulfur crude oil. sulfur crude oil, and is considered representative of the broader Middle East crude oil products.
However, among the three benchmark futures, the price performance of Brent and WTI was significantly better than that of Oman crude oil, A surge in demand for road transport fuels led to a recovery in crude demand over the summer, while a sharp decline in U.S. shale production supported U.S. and European prices.
But light crude has lagged behind other regions in Asia in recent months, largely due to China’s purchases of spot goods have slowed.
DME Oman crude oil futures prices reflect strong rebound in oil prices in 2020
Brent Crude Oil/Oman Crude Oil Futures
Historically, Brent Crude Oil Futures have been trading at a premium to medium sour crudes such as Oman crude. As of 2018, North Sea Brent benchmark futures have typically traded $1.50 to $3.00 per barrel higher than the Oman sour crude benchmark in the Middle East.
The Brent/Oman crude futures spread is a key measure of the difference between North Sea and Asian crude oil prices, helping refining Traders track arbitrage opportunities in Asia and measure quality differences between grades.
Light sweet crude oil has higher yields of transportation fuels, such as gasoline, diesel and aviation gasoline, compared to medium High-quality sour crude oil has historically commanded a premium. Heavier crude oils have higher residual fuel oil content and require higher-cost further processing to produce more popular refined oil products.
The expansion of the U.S. shale oil (a type of light, sweet crude oil) industry has resulted in total oil production reaching a pre-pandemic The increase to about 13 million barrels per day established the status of the United States as a crude oil exporter, which in turn caused the scales in the global market to tilt against light oil, even making Brent crude oil futures prices lower than DME Oman crude oil.
At the beginning of the COVID-19 outbreak in the first quarter of 2020, demand in Asia fell sharply, but Europe soon took its place. By May 2020, Brent crude oil was trading at a new low discount to DME Oman crude oil.
This year’s price recovery has been driven largely by road transport fuel demand, driving the rebuilding of Brent crude futures relative to DME Oman crude premium situation. Since the start of 2021, premium levels have ranged from above $1.00 to $2.00/barrel.
Chinese Procurement
This year’s demand recovery is mainly driven by the United States, with Europe’s role slightly lower, while Asia’s demand recovery is faltering due to the COVID-19 epidemic. The region has frequently implemented lockdowns and travel restrictions.
The slowdown in crude oil purchases is most prominent in China, where imports fell to about 10 million barrels per day this summer, compared with more than 13 million barrels per day last summer. At that time, Chinese refiners seized the opportunity when crude oil prices fell to a 20-year low during the epidemic and purchased cheap crude oil in large quantities.
Another reason for the slowdown in China’s imports is China’s restrictions on the private oil refining industry, including a sharp reduction in crude oil prices in the second half of this year. Import quotas.
However, sour crudes from Oman and the Middle East have performed well despite reduced demand from the world’s largest crude importer, Russian crude oil exported from the Pacific Ocean is facing huge downward pressure.
Russian ESPO crude oil, a crude oil that is lighter in density than typical Middle Eastern medium sour crude oil, fell to a level lower than that of DME Oman crude oil of the same quality, and Sokol crude oil futures once fell to a price difference of less than 1 US dollars per barrel with Oman crude oil.
In the second half of 2020, the average price of ESPO futures was about US$1.60/barrel higher than DME Oman crude oil, but in 2021 In August 2018, its regular price was at a discount of US$1/barrel to Oman crude oil futures. In 2020, the price difference between Sokol crude oil futures and Oman crude oil and similar Middle Eastern grades of crude oil was generally more than $3/barrel.
The Middle East’s flagship Murban light sweet crude oil has also been affected by weaker Russian crude prices as they compete customers in the same market.
In June and July this year, the price difference between Murban crude oil futures and DME Oman crude oil futures was approximately US$0.75. /barrel,���In August, premiums were cut in half as Murban faced stiff competition from cheaper Russian crude.
WTI crude oil futures rebound in 2021
Among the global futures benchmarks, WTI futures price performance was the strongest as demand in the U.S. market was stronger and falling crude oil inventories also supported the U.S. market.
In June, the WTI/Oman crude oil futures price difference averaged -$0.64/barrel, the highest since January 2017. Minimum spread, although the recent economic slowdown in the United States has caused WTI crude oil futures prices to decline relative to Oman crude oil.
As Hurricane Ida hit the Gulf of Mexico, the United States shut down large-scale production in the Gulf of Mexico, and 10 days after the hurricane hit, crude oil Production even fell by about 1.5 million barrels per day.
However, the main impact is on the heavy crude oil market. In early September, the trading price of U.S. flagship Mars heavy sulfur crude oil was There is a small premium compared to the WTI Cushing benchmark. This compares to a discount of around $1.50/barrel before the hurricane hit.
DME Oman crude oil futures track the global impact of the new crown epidemic and market recovery
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