Bloomberg News reports that oil buyers across the globe have been subjected to the highest premium for the supplies they have not seen in months, perhaps longer. This happens as stockpiles have been dwindling at the largest US storage hub. It is reverberating through the markets right from Asia through the Middle East to Europe.
US Crude Cargoes
The flagship US crude cargoes that are on offer in Asia are closing this year at the costliest premium. The spread between the Middle East and Brent oil has surged since February to the highest. At the same time, the premium for US supply for the near term is closer to the highest since July 2022.
What is the Scenario at the Delivery Point?
Cushing in Oklahoma is the center of the happening story. It is the delivery point for the benchmark US crude futures. It helps set the price of oil across the Americas and beyond. So, what about the inventories at the hub? The inventories are now above the seasonal lows at the hub, last seen in 2014. This happens when the world is immersed in a tight supply situation as Russia and Saudi Arabia cut their output.
Of late, the US has helped fill a void left in the market. It has regularly sent more than 4 million barrels daily to quench appetite globally. The stockpiles dropped in the US between overseas shipments and strong demand domestically. However, the question is whether the flow will be continuity.
Cargoes for Asia
For January, the West Texas International Midland crude delivery cargo to Asia is on offer for sale at premiums of $9 per barrel, which is above the Dubai oil benchmark. The traders that sell and buy the grades, revealed the same. This would be the highest premium seen in the current year, as per the data that Bloomberg has compiled.
The actual trading will begin next week, wherein there will be more clarity on how strong the market for US barrels has gotten.
Bloomberg News reports that Abu Dhabi’s Murban crude soared against Dubai on the ICE Futures Abu Dhabi exchange.
Futures Market Scenario
As far as the futures market is concerned, the manifested surge is just apparent. The tightness that prevailed in the US supplies led to the narrowing of the gap between the international benchmark Brent and US crude to below $3 per barrel. This was the smallest since last year May. In the meantime, the spread between Brent and Brent Dubai EFS, also known as Middle East’s Dubai and Brent’s marker, has soared.
There has been a lot of hue, cry, and angst related to the shrinking US inventories. However, there have been no concrete signs of a probable slowdown in exports in America yet.
