NEW YORK (Oil Price) -The world’s most important oil-importing region, Asia, is showing signs of weaker physical demand with lower cargo arrivals in May and crashing refining margins as a COVID resurgence depresses fuel demand in India and other south Asian markets.
Crude oil futures prices rallied to a two-year high this week after OPEC+ reaffirmed plans to unwind another 840,000 barrels per day (bpd) of its total cuts in July.
Yet, provisional crude oil import data for Asia’s top markets signal that physical demand is softer than what investors bet in the paper market, Reuters columnist Clyde Russell argues.
However, most analysts, forecasters, OPEC, and the International Energy Agency (IEA) continue to expect strong global oil demand in the second half of this year that would offset weakness in some Asian markets this quarter.
The COVID crisis in India, which peaked in early May, and the return of restrictions in several south Asian countries such as Malaysia, which is now in a third lockdown, have been depressing fuel demand in many parts of Asia in recent weeks, bloating the fuel inventory glut further and crashing refining margins. In addition, some refineries, including in the world’s top importer China, have entered planned seasonal maintenance this spring and have reduced their crude intake in the second quarter.