Omicron threatens Asia oil demand just as pricing favours Atlantic crude

Recent shifts in the relative price of different crude grades have dealt oil exporters from the vast Atlantic Ocean basin the best chance in months to sell to top consuming region Asia, but sales have been sluggish as Covid-19 fears cool demand.

The Omicron coronavirus variant has curbed oil consumption in Asia just as US and West African sellers pinned their hopes on the changing market structure paving an easier path eastward than competing oil from the Middle East.

Global benchmarks Brent and West Texas Intermediate crude were pummelled last week as tight supplies eased with US strategic petroleum reserve sales and a decision by the Organization of Petroleum Exporting Countries and their allies to boost output.

Brent crude's premium to Dubai quotes sank to $2.56 a barrel last week, the lowest since March, making the export of Atlantic Basin crude oil grades more attractive for Asian buyers, according to traders and Refinitiv data.

Sales of Nigerian and Angolan oil to India have picked up along with sales of US WTI Midland crude to East Asia.

Angolan Girassol crude oil and Nigerian Qua Iboe have been offered at robust premiums of $1.60 and $1.40 above dated Brent a barrel respectively on a free-on-board basis - still cheap compared with Middle East light grades.

"We've seen an arbitrage window open, and demand from India and some markets further East has been encouraging in recent weeks, so that's kept offers high," said one seller of West African crude oil.

"Trading has gotten quieter in the last few days though. There's a lot that's still uncertain about how/if new lockdowns will affect demand in the new year."

With refinery maintenance season due from March and as refining margins have come off sharply recently on Omicron fears, Asia's appetite might not be as robust as before.

Traders said Chinese buyers would not be easily tempted by more affordable barrels, with independent refiners allocated slimmer import quotas this year and state companies already well supplied.

Ongoing tax investigations in Shandong province, where most independents are based, have also curbed appetite for Brazilian and African oil in the world's largest importer.

Beijing is also expected to conduct a second SPR crude auction from its eastern Zhoushan storage.