The Dubai benchmark oil prices, a bellwether of demand in Asia, have weakened in recent weeks, reflecting concerns about oil consumption in the most important crude oil importing region.
The premium of the international benchmark Brent Crude to the Dubai swaps widened to $6.71 per barrel on Monday, up from just over $5 per barrel at the end of September, according to Bloomberg’s estimates. In addition, the U.S. benchmark, WTI Crude, had flipped by mid-October to a slight premium over the Dubai swaps – the benchmark off which crude going to Asia is being priced – compared to a discount of over $2 per barrel at the end of September.
The weakening of the Dubai quotes could be a sign that the market continues to be apprehensive about the Chinese “zero-Covid” policy, which has been weighing on oil prices in recent months alongside general concerns about looming recessions in major Western economies.
On Sunday, China signaled its zero-Covid policy would remain in place for the time being, Chinese President Xi Jinping said at the major twice-a-decade Communist Party congress. The gathering is closely watched by commodity traders and markets for signs of Chinese economic policies that could affect demand for raw materials.
“Apart from the general risk to global growth, another source of price weakness remains China. This is where the government’s firm belief in its zero-Covid policy has reduced growth and consumption, while an ongoing property crisis has also clouded the economic outlook,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said in a weekly commodity overview on Friday.
“Crude futures were marginally firmer mid-morning in Singapore on Monday,” Vanda Insights said at the opening of the Asian oil trade today.
“A 3-4% slump at Friday’s settle after a rapid sell-off during the US session was encouraging some bargain-hunting buying on Monday, but the momentum looked weak, amid thin trading volumes,” according to Vanda Insights.
By – Tsvetana Paraskova