European refiners overstocked over recede of oil shortfall

As a result of the impending EU ban on Russian oil, European refiners are now overstocked with petroleum, contrary to expectations.
The front-month Brent crude futures spread shrank significantly this week as demand for physical oil increased and concerns over the EU’s embargo on Russian crude started to fade.
Supply tightness is typically indicated by premiums on current prices to future prices, or what is known as a backwardated market structure.
Traders pointed out that while Asia is asking for less crude due to a slowing economy and growing use of Russian barrels, Europe is able to substitute Russian oil with grades from the Middle East, the United States, and Latin America
Brent futures prices have also fallen this week by approximately 7%, declining for the second straight week.
The EU’s ban on Russian oil caused dealers and refiners to race to purchase as many barrels as they could in August out of concern that there would be a shortage.
From December 5 and February 5, the EU will forbid the import of Russian crude and oil products.
On December 5, a G7 price cap on Russian crude also goes into effect.
Russian crude, which has been a mainstay of Europe’s refining system, has been replaced, according to traders, and refiners have become used to it.
The prices of alternative grades like West Africa, WTI Midland, and Kazakh CPC Blend have all been under pressure as a result.
According to Refinitiv Eikon statistics, European imports of Latin American petroleum have increased dramatically since Russia’s invasion of Ukraine, averaging 313,000 barrels per day (bpd) this year, up from 132,000 bpd in 2021.
Europe brought in about 600,000 bpd of crude from the area in July alone, the most since at least 2015.
The amount of crude oil imported into the United States has also climbed, going from 800,000 bpd last year to 1.1 million bpd so far this year.
Due to an excess supply, WTI Midland prices declined to their lowest level since mid-June.
According to data from Refinitiv Eikon, Iraq also increased exports to Europe by more than 20% between July and November while facing more fierce competition from cheaper Urals oil in Asia.
Spot premiums for grades from the Middle East have fallen precipitously in recent days in Asia, with Dubai’s premium reaching its lowest level since late January.
Meanwhile, due to a slowdown in the economy, Chinese refiners requested less Saudi oil in December.
Source: Reuters

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