A closely watched gauge of Asian oil demand is at its tightest level in more than two years, underscoring the region’s pick-up as investors wait for a slowdown in Europe and the United States after recent turmoil in their banking systems.
The spread between London Brent and Dubai crude fell to $1.54 a barrel, the lowest since February 2021 and below $9.30 in November.
The development, boosted in recent days by refinery strikes in France that have hit crude demand in Europe, is another sign of Asia’s strength relative to other regions in terms of crude consumption energy
Thanks largely to China’s economic recovery after the end of the coronavirus lockdown, Asia will account for 76% (or 1.3 million barrels per day) of global oil demand growth this year, according to JPMorgan Chase & Co. co. Europe and the US will see an increase of just 30,000 barrels a day, analysts at the bank, including Natasha Kaneva, said in a note last week.
Dubai crude spot prices act as a proxy for sour and heavy barrels produced in large quantities in the Persian Gulf. Oil generally sells for less than Brent, which is lighter, sweeter and easier to refine into fuels like gasoline.
Gulf nations such as Saudi Arabia, Iraq and the United Arab Emirates sell most of their oil to Asia, with China, India, Japan and South Korea the main buyers.
Still, the rise in the Dubai benchmark may have run its course now that the discount to Brent is so low, according to analysts at FGE, an energy consultancy.
The spread “should quickly approach a floor and we see support on the horizon” as Brent consolidates along with financial markets, FGE said. Bank stocks have clawed back a small part of their losses a week after the state-led rescue of Credit Suisse Group AG over the weekend.
–With help from Sharon Cho.
Photo credit: iStock.com/lucadp
