PremiumIncreased competition from European refiners as they cut back on Russian crudes for alternative crudes including African grades, which will likely continue as the EU’s sanctions come into force by early December
New Delhi: Asia may end the year 2022 with a sharp drop in crude inflows from Africa because of the higher freight rates, a wider Brent-Dubai spread and increased competition from European refiners looking for alternatives to Russian-created hurdles, according to the S&P Global Commodity Insights.
“The widening Brent-Dubai spread, and high freight rates have dampened the attractiveness of Asia’s import of African crudes to the region," said Lim Jit Yang, advisor for Asia-Pacific oil markets at S&P Global.
He added that there is increased competition from European refiners as they cut back on Russian crudes for alternative crudes including African grades, which will likely continue as the EU’s sanctions come into force by early December.
China, Asia’s biggest oil consumer, has aggressively picked up cargoes from diversified suppliers to take advantage of the widespread price volatility.
China’s crude imports from Africa fell by a sharp 22.6% year on year to 1.06 million b/d in the January-September period, according to the data from the country’s General Administration of Customs showed. As a result, the region’s market share fell to 10.7% in the nine-month period, from 13.2% a year earlier.
The country’s independent refineries were the main contributors towards the reduction in African volumes as they turned to more attractively priced crudes from not only Russia but also cargoes from Iran and Venezuela, S&P Global said.
S&P Global data showed that the sector’s crude imports from Angola dropped 59.4%, or 160,000 b/d, year on year to 109,000 b/d in the first nine months of this year. In comparison, China’s total crude imports from the same African supplier fell by 155,000 b/d to 630,000 b/d in the same nine-month period, the GAC data showed.
“The growing share of Russian crudes in India’s import basket, a tighter market structure, as well as increased volatility in freight markets pulled down the share of West African crudes over January-September 2021 from 12.5% to 8.4% in the same 2022 period," said Shreyans Baid, senior oil analyst for South Asia at S&P Global.
“The future trend will depend on various factors including how the EU sanctions play out," Baid added.