Spot premiums for Middle Eastern crude have surged to their highest levels in over two years, driven by robust demand from major importers China and India seeking to replace supplies impacted by recent sanctions on Russia and Iran.
Key Highlights:
Sanctions Impact:
The Biden administration announced extensive sanctions targeting Russian oil producers and tankers, disrupting supply from the world’s second-largest oil producer and tightening availability of shipping options.
Increased Demand:
This disruption has led to a scramble among buyers in China (the largest importer) and India (the third-largest importer) for alternative oil supplies.
Price Movements:
QatarEnergy has significantly raised its term price for al-Shaheen crude oil loading in March to $3.81 per barrel above Dubai quotes, more than doubling from the previous month. This marks the highest price level since October 2022.
Premiums for Middle Eastern benchmarks have also rallied above $4 per barrel, with Oman and Dubai benchmarks reaching their highest since November 2022.
Market Reactions:
Analyst Anh Pham from LSEG noted that buyers are aggressively bidding to secure supplies and avoid operational disruptions.
Indian Oil Corp issued its first sour crude tender since March 2022 and has launched a separate tender for sweet crude.
Recent Transactions:
Unipec purchased a March-loading Qatar Marine crude cargo at a premium just above $3 per barrel to Dubai quotes, a tenfold increase from the previous month.
Other notable purchases include Hindustan Petroleum Corp acquiring 1 million barrels of February-loading Iraqi Basra Medium crude at a premium of $1.90 per barrel.
Light Grades Demand:
Premiums for light grades are also on the rise, with QatarEnergy selling a March-loading Land crude cargo at a premium above $2 per barrel to Dubai prices.
Context of Supply Shifts:
Before the sanctions on Russian oil, Chinese refiners were already looking to replace Iranian supplies due to concerns over potential embargo measures from the incoming Trump administration.
Earlier this month, some Chinese buyers requested additional February-loading cargoes from Saudi Aramco, but they did not receive extra supply.
Future Implications:
The International Energy Agency warned that the latest round of U.S. sanctions could significantly disrupt Russian oil supply chains, although it has not yet adjusted its supply forecasts.