In this list

Oil Quarterly: Asian demand, fuel oil dynamics expected to drive Atlantic Basin crude

Energy | Oil | Crude Oil

Platts Crude Oil Marketwire

Energy | Electric Power | Oil | Refined Products | Metals | Non-Ferrous | Steel | Shipping | Containers

Market Movers Americas, Oct. 2-6: Regulatory talks ongoing for power, metals markets

Oil | Energy Transition | Energy

APPEC 2024

Energy | Energy Transition | Natural Gas | LNG | Oil | Electric Power | Hydrogen | Crude Oil | Renewables | Nuclear

Australia's LNG exports expected to decline to 79 mil mt in FY 2024-25

Energy | Oil | Crude Oil

Dubai Crude Oil Price Assessment

Metals | Energy | Coal | Energy Transition | Electric Power | LNG | Natural Gas | Steel | Steel Raw Materials | Coking Coal | Emissions | Carbon | Electricity | Renewables

Commodity Tracker: 5 charts to watch this week

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

Oil Quarterly: Asian demand, fuel oil dynamics expected to drive Atlantic Basin crude


Chinese demand remains largest factor for Angolan differentials

Urals diffs hit multi-year highs on Asian arbitrage, strong fuel oil

NWE refinery dynamics, US crude expected to drive N Sea market

Dated Brent, tax uncertainty leads to Russian domestic volatility

  • Author
  • Bola Olalemi    Tarek El Mesallamy    Anthony Guida    Elza Turner
  • Editor
  • Maurice Geller
  • Commodity
  • Oil
  • Topic
  • IMO 2020

London — The push and pull of Asian demand drove crude differentials in the Atlantic Basin throughout much of the later part of 2018, and is likely to continue to drive prices moving into the New Year with China expected to add some 800,000 b/d of complex refining capacity ahead of the onset of IMO 2020 -- the implementation of the 0.5% sulfur cap on marine fuel by the International Maritime Organization.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

This was most heavily felt in the West African crude markets, where differentials climbed sharply -- particularly for heavier sweet crudes in Angola and Republic of Congo -- throughout the first half of Q4 amid strong buying demand, before dropping sharply ahead of the end of the year as China's import quotas were saturated.

Differentials for the majority of the heavier Angolan crude grades like Dalia and Pazflor hit 2018 highs in October, with their discounts to lighter barrels narrowing sharply.

Market participants pointed to strong Chinese buying demand as independent refineries, spooked by the onset of fresh sanctions against Iran and looking to fulfill end-of-year crude quotas, bought out large swathes of the October and November loading programs.

However, the attractive arbitrage was ultimately short-lived as freight rates spiked and other crudes from the Mediterranean and Latin America became increasingly competitive. Further, China was granted an exemption to import Iranian crude, leading to a drop-off in demand for Angolan alternatives.

By contrast, differentials in Nigeria have largely continued to hold, with distillate-rich grades like Forcados, Bonny Light and Qua Iboe generally maintaining premiums of at least $1/b to Dated Brent. Increasingly, however, Nigerian crude has been clearing into Europe over Asian tenders, where it faces strong competition from more local alternatives.

The strengthening of fuel oil, gasoil and diesel cracks throughout the past quarter has added some additional local support for distillate-rich grades in Nigeria and the medium heavy grades in Angola. As Europe moves further into winter pricing, it is likely that European refiners will continue to favor distillate-heavy crudes where possible, which could add further support to the Nigerian crude markets.


Differentials for Russian Urals sour crude reached multi-year highs across the Northwest European and in the Mediterranean market throughout the third quarter, driven by the reintroduction of Iranian sanctions and an unexpectedly strong fuel oil crack.

In Northwest Europe, differentials for Urals delivered CIF basis Rotterdam jumped from discounts of $3/b to Dated Brent in October to premiums to Dated Brent by the end of November. In the Mediterranean, Aframax cargoes of Urals delivered basis Augusta have been pricing at premiums to Dated Brent steadily since mid-November.

This strength was driven in part by strong Urals flows to Asia throughout October, and much stronger fuel oil crack in Northwest Europe throughout much of Q4 amid ongoing refinery maintenance.

Heading into 2019, however, there are questions about whether or not recent strength in European sour crude can hold with fuel oil expected to weaken ahead of the onset of IMO 2020. Additionally, European sweet crude markets have remained under pressure, which is likely to make them increasingly competitive as distillate cracks strengthen throughout the winter season.

With the gasoil cracks reaching multi-year highs in Europe in Q4, strong buying interest for distillate-rich Azeri Light and Siberian Light is expected to strengthen further moving into the new quarter.

Market participants will be watching for the impact of the force majeure declared on Libya's Sharara oil field in mid-December which resulted in a loss of 315,000 b/d production. Should the outage persist it is expected to support differentials across the sweet crude complex.


European refinery margins and Asian demand pulled and pushed North Sea fundamentals throughout the last quarter of 2018 and will be equally important in the New Year.

Completed planned maintenance in Northwest Europe will see refinery rates at near full run capacity until April, boding well for North Sea grades, but it will be product cracks moving into IMO 2020 which will likely determine which grades generate the most interest among both local and Asian buyers.

Cargo differentials to Dated Brent for heavier grades like Norwegian Grane diverged from the lightest and sweetest of the BFOE crudes which all fell as their yields were not supported by product cracks.

US exports will remain the wild card in northern European sweet crude markets, as refiners turn into regular buyers of WTI Midland and Eagle Ford. Fawley, Pembroke and Rotterdam -- all once guaranteed shorts for North Sea crudes -- will be more flexible in procuring their supply as these sites become regular buyers of US grades, economics permitting. Forecasts on imports range between 450,000 and 600,000 barrels/month, according to market sources. Meanwhile, record high dirty VLCC freight rates will continue to be a trend in January, hindering arbitrage margins to Asia and putting Northwest Europe at risk of becoming oversupplied and with closed exit doors, due to imports from the west and no exports east.


The Russian domestic crude market faced high volatility throughout 2018, with heavy fluctuations in both global outright prices and the Russian ruble creating uncertainty in the local Russian sector.

Outright Dated Brent prices dropped from more than four-year highs of $86.115/barrel in October to below $60/b by end-November. While the ruble normally moves in line with crude prices, it has become detached in 2018, which has led to a general increase in export netbacks.

As a result, monthly changes on the domestic fixed crude price market recorded huge swings, with prices at times rising or falling by as much as Rb6,000/mt ($90.20/mt).

Overall the higher crude price environment has boosted domestic refinery economics -- Russia's recent tax reform policy has meant that fixed product prices had made it difficult to maintain run stability, prompting some end-users to cut back on runs.

Meanwhile, in order to mitigate the impact on the industry of the gradual drop in export duties, Russia passed legislation which envisages paying refineries excise tax refund on the processed crude oil. The excise refund will be calculated based on gasoline and diesel netbacks and would be paid to refineries depending on their output of Euro 5 gasoline and diesel.

Oil companies are hoping that the refunds will help navigate through difficult times but there are concerns how smoothly the new system will work.

--Bola Olalemi,

--Tarek El Mesallamy,

--Anthony Guida,

--Elza Turner,

--Edited by Maurice Geller,