The crude oil benchmarks in the Middle East, Dubai and Oman, continued to fall this week as well, as demand in Asia slumps. The coronavirus has now claimed more victims, and more quickly, than the SARS outbreak in 2003.
Oman and Dubai futures dropped for a third consecutive trading day, after falling to a nearly year-low last Thursday, due to reduced economic activity and depressed fuel demand in the world’s top oil importer, China.
Asian refiners are not showing any buying interest right now, sour crude oil traders told S&P Global Platts this week.
Due to weak fuel demand and depressed industrial activity, Chinese refiners—from the biggest refiner in Asia, Sinopec, to the independent refiners in Shandong—are cutting refinery runs, while commodity trading houses and oil majors are scrambling to find spot buyers for crude oil outside China.
The slump in the Oman and Dubai prices are indicative of the bearish sentiment in the Middle East crude complex as market participants see the Middle Eastern oil producers feel the pinch from the hit to oil demand in what is typically the key oil demand growth driver.
The slowdown in China’s industrial activity is causing the worst shock to oil demand in over a decade, Jeff Currie, global head of commodities research at Goldman Sachs, said in an interview on Bloomberg last week. Saudi Arabia reacted last week to the depressed demand in Asia by slashing its official selling prices (OSPs) to the region for March. Although price cuts were expected, they were deeper than analysts had forecast.
Saudi Aramco slashed its OSP for Asia for the Arab Light crude by $0.80 per barrel to a premium of $2.90 over the Oman/Dubai benchmark—a deeper cut than a Bloomberg poll of traders had expected. Aramco left only Arab Heavy prices for Asia unchanged, while it raised prices for Europe and cut the prices for the U.S.