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Global oil markets under pressure as Asia destocks, China imports slowed

Crude oil producers from Europe, Africa and the United States faced difficulties selling to Asia, especially China, as buyers took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said on Thursday.

Chinese independent refiners, which account for a fifth of the country’s imports, have slowed imports in the second quarter because of refinery maintenance, strong Brent prices and a large influx of supplies, including Iranian oil, in first quarter.

These buyers and others in Asia are lapping up cheap oil offered by traders under pressure to clear storage after Brent crude flipped into backwardation, with prices for prompt delivery higher than those for future months, traders said.

As a result traders were forced to sharply reduce prices for spot cargoes loading in April and May from Europe, Africa and the United States for delivery to Asia.

Lockdowns in Europe have also reduced demand, they said.

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“Barrels are struggling to find homes in the export market as Asia still isn’t buying and Europe is struggling as well,” said Scott Shelton, energy specialist at United ICAP.

Crude grades priced on Brent were worst hit, traders said, as a wide spread between the global benchmark and Middle East’s Dubai crude price made them least appealing to Asian buyers.

“China’s demand for (Russian) Urals, West African, CPC Blend oil just evaporated. Buying from stock is much more interesting for them now,” said a source with a western trading house.

Caspian CPC Blend crude’s discount to dated Brent widened to $2.85 per barrel, the lowest since mid-May 2020 when the Covid-19 pandemic caused oil demand to plunge, Refinitiv Eikon data showed.

CPC Blend is a popular grade with South Korean refiners, but this month they also minimized oil purchases amid refinery maintenance and buying from storage, two traders said.

Unipec, the trading arm of Asia’s largest refiner Sinopec, offered six of its 10 term Angolan crude cargoes in April to the market, traders said.

An April-loading cargo of Angolan Mostarda crude sold this month for $1.50 a barrel below dated Brent, down over a dollar from levels seen in the previous month, they said.

“There’s just too much supply so buyers want to see cheap cargoes,” a Singapore-based trader said.

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