IGI Logo

* Asia may end the year 2022 with a sharp drop in crude inflows from Africa as relatively higher freight rates, a wider Brent-Dubai spread and increased competition from European refiners looking for alternatives to Russian supplies created hurdles, a trend that is unlikely to change anytime soon, analysts told S&P Global Commodity Insights.

* In addition, the plentiful availability of Russian crude at discounted prices -- shunned by many western countries -- prompted refiners in leading consumers in Asia, such as India and China, to snap up as many cargoes as possible, displacing multiple grades of African crudes.

* "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. "In addition, 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," he added.

Flows to China, India fall

* With plentiful options to buy at attractive prices, China, Asia's biggest oil consumer, aggressively picked up cargoes from diversified suppliers to take advantage of the widespread price volatility.

* Its crude imports from Africa fell by a sharp 22.6% year on year to 1.06 million b/d in the January-September period, data from China'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, sources 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 155,000 b/d on the year to 630,000 b/d in the same nine-month period, the GAC data showed.

* Shreyans Baid, senior oil analyst for South Asia at S&P Global, said 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. "The future trend will depend on various factors including how the EU sanctions play out," Baid added.

Above views are of the author and not of the website kindly read disclaimer