MOSCOW (MRC) -- Middle East crude oil exporters are re-building market share in the key Asia region, a trend likely to continue as the price advantage of local grades against those from the Atlantic Basin jumps to the most in eight years, reported Reuters.
Top Middle East exporters such as Saudi Arabia, Iraq and Kuwait are seeing increased demand for their crude from Asia, while producers in the United States, Europe and Africa are suffering declining interest.
This dynamic is being driven by the strong rally in the main price benchmarks for Atlantic Basin crudes, with Brent futures ending at USD84.55 a bbl on Monday, up 63.2% since the end of last yr, while West Texas Intermediate (WTI) finished at USD84.05, up 73.2% so far this year.
While key Middle East crude prices have also risen sharply this year, they are now priced at substantial discounts to the two main Atlantic Basin contracts. One measure of this is the Brent-Dubai Exchange for swaps, which rose to USD5.24 a bbl on Monday, the highest premium for Brent over Dubai since September 2013.
Effectively, this means any Asian-based refiner looking to buy oil today will be able to buy Middle East grades far cheaper than those from the United States, Africa or Europe. They will also enjoy cheaper freight costs given that the Middle East is a far shorter sea voyage than coming from the west coast of Africa, Europe's North Sea or the US Gulf.
Looking at physical spot prices for crude confirms the current dynamic, with Nigerian Bonny Light ending at USD85.35 a bbl on Monday, while Abu Dhabi's Murban finished at USD80.51, a discount of USD4.84, which is more than double the USD1.95 it was at the end of September.
The Middle East's share of Asia's imports rose to 61.6% in October, up from 59.1% in September and well above the 2021 low of just 54% in May, according to data compiled by Refinitiv Oil Research. In contrast, the share of crude from the West, which includes the Americas and Europe, dropped to 19% in October, the lowest this year and down from peak share of 28.8% in February. Africa's share of Asia's imports also dropped in October, slipping to 8.4%, also the lowest this yr and down from the peak share of 13.3% in April.
Top Middle East exporters have been increasing output in line with the agreement by the OPEC+ group to lift production by 400,000 barrels per day (bpd) each month from August to December. Saudi Arabia, the world's top exporter, boosted output by 100,000 bpd in October from September, while Iraq increased production by 70,000 bpd, the United Arab Emirates by 40,000 bpd and Kuwait by 30,000 bpd.
As MRC informed earlier, ExxonMobil Corp, one of the world's petrochemical major, is pursuing carbon capture storage (CCS) hubs across Asia and has started talks with some countries with potential storage options for carbon dioxide. One of Exxon's key projects is to build CCS hubs in Southeast Asia, similar to one being built in Houston, Texas, ExxonMobil Low Carbon Solutions President Joe Blommaert told Reuters.
We remind that ExxonMobil shut down at its cracker in Singapore for maintenance last year. Thus, the company halted operations at the cracker on September 14, 2020. The cracker remained off-line till end-October, 2020. Located at Jurong Island, Singapore, the cracker has an ethylene production capacity of 1 million mt/year and a propylene production capacity of 450,000 mt/year.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,638,370 tonnes in the first eight months of 2021, up by 10% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 989,570 tonnes in the first eight months of 2021, up by 30% year on year. Deliveries of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas shipments of injection moulding PP random copolymers decreased significantly.