Heavy trading in Dubai oil has lifted its premium to WTI crude to its highest since late March, a development that could make U.S. crude even more competitive in Asia.
More traders have turned to Dubai after Persian Gulf producers such as Saudi Arabia hiked prices and shipping rates also climbed.
Bloomberg has reported that Dubai swaps were trading at a premium of $3.65 a barrel above U.S. benchmark West Texas Intermediate futures in Singapore on Wednesday, with the spread usually smaller than $3. Increased trading of partials–smaller lots that are accumulated and converted into physical cargoes–is also giving a boost to Dubai oil prices.
Dubai oil is considered a proxy for other regional grades.
Two South Korean refiners have purchased ~8 million barrels of U.S. oil, including WTI Midland crude, so far this month. Asian exports of U.S. crude have been climbing with buyers returning after months of scooping up cheap Russian barrels.
U.S. crude oil exports for the month of April surpassed forecasts, hitting a record 4.5 million barrels per day in March thanks to a strong Chinese market due to rising fuel demand. U.S. crude exports grew 22% last year from 2021 after Russia’s invasion of Ukraine led the U.S., the EU and Canada to ban imports of Russian oil and dramatically altered global flows.
China is the world’s second-largest oil consumer and has recorded an economic resurgence ever since it rolled back its strict zero-covid policies. April exports to China surged to ~850,000 barrels per day, the highest level since May 2020.
U.S. crude tends to be quite a bit cheaper than Brent. The average discount in February was $6.47 and nearly $6 less in the first half of March. Foreign buyers tend to increase their purchases of U.S. crude whenever the discount to Brent exceeds $6 per barrel. Demand for U.S. crude may increase significantly in the coming months with Middle Eastern crude getting more expensive.