LONDON (Bloomberg) - The global oil market keeps sending up flares on the outlook for weaker demand. In the latest, a closely-watched gauge of Asian crude consumption tumbled to a seven-month low as surging virus cases in China trigger lockdown-like restrictions in the world’s biggest importer.
The premium of Oman futures over Dubai swaps fell below $1 a barrel on the Dubai Mercantile Exchange. It’s plunged about 80% this month.
Oil markets have weakened in November, with a host of widely-watched metrics flashing warning signs and dragging futures prices lower. Among them, the prompt spreads for both Brent crude and leading U.S. grade West Texas Intermediate have dipped into contango, a bearish pricing pattern that indicates ample near-term supply. As the red flags proliferate, Brent futures declined to their cheapest price since January earlier this week.
Expectations for a recovery in Chinese oil demand are fading as daily Covid-19 cases have hit record levels, spurring officials to step up containment measures and movement curbs. Amid the challenging backdrop.
Brent futures headed for a third weekly drop amid further signs from China that anti-virus restrictions in key cities are multiplying as officials seek to quell Covid-19 outbreaks.
The Oman futures-Dubai swaps gauge, which slipped below $1 for one day in April. It spiked as high as $15 in March as many buyers started shunning Russian oil, raising the appeal of Mideast crude and boosting the premium.
With physical trading this month mostly concluded for January-loading cargoes, spot premiums for key Persian Gulf grades have declined sharply. While China’s Rongsheng Petrochemical Co. did purchase about 7 million barrels mid-month, that wasn’t enough to lift the sentiment, traders of those grades said.