Oil prices are rising; growing supply from Kuwait and Russia weighs on fuel oil in Asia

RIYADH: Oil prices rose on Tuesday, supported by a weaker dollar and a US plan to replenish oil reserves, but gains were capped by uncertainty over the impact of rising Covid-19 cases in China, the largest oil importer.

Brent crude oil futures were up 50 cents, or 0.65%, at $80.30 ($1=0.94 euros) a barrel around 10:35 GMT, adding to a gain of 76 cents recorded during the previous session.

West Texas Intermediate crude oil futures rose $1, or 1.31%, to $76.19, after gaining 90 cents on Monday.

Oil prices were supported by US plans announced last week to buy up to 3 million barrels of oil for the Strategic Petroleum Reserve after releasing a record 180 million barrels this year.

A weaker dollar also supported prices, making oil cheaper for those who hold other currencies.

“Oil prices could rise further as we expect physical markets to tighten further due to supply constraints and stronger global demand,” Qatari bank QNB said in a statement. note, forecasting prices between $90 and $115 a barrel over the next few quarters.

Rising supply from Kuwait and Russia will weigh on fuel oil in Asia in 2023

Asia is expected to be flooded with more fuel oil in 2023 as Kuwait’s new Al-Zour refinery ramps up production and Russia diverts record volumes from Europe to the East in anticipation of sanctions.

Higher supply is expected to weigh on fuel oil prices and refiner margins in Asia next year, amid strong demand from the ship refueling and power generation sectors.

The Al-Zour refinery, which has a production capacity of 615,000 barrels per day (bpd) and began exporting products in November, is set to become a major supplier of ultra-low sulfur fuel oil (VLSFO), commonly used for ship refueling. This operation is known as bunkering.

Once fully operational, the refinery will export between 400,000 and 500,000 tonnes of VLSFO per month, which will meet 8-10% of Asian demand if supply goes east, according to industry sources and Reuters calculations.

Meanwhile, high-sulphur fuel oil has also been under pressure since May, as Russian barrels flooded Asia after Western sanctions imposed following the Russian invasion of Ukraine. Asian refiners’ crack margin for this product fell to an all-time low in October.

Asian fuel oil imports from Russia hit a record high of 736,000 bpd in October and stood at 410,000 tonnes as of December 13, according to Kpler data, ahead of a complete ban on Russian imports by the European Union on February 5.

Russian company Transneft receives Polish and German oil requests

Russian company Transneft has received requests for oil from Poland and Germany for 2023, the head of the state oil pipeline monopoly told Rossiya-24 TV, adding that supplies via the southern spur of the Druzhba pipeline should remain stable next year.

The European Union has pledged to stop buying Russian oil by sea from 5 December. Western countries have also imposed price caps on Russian crude oil, but the Druzhba pipeline remains sanction-free.

Transneft’s comments run counter to rumors that Poland intends to walk away from a deal to buy Russian crude.

(with Reuters)

This text is the translation of an article published on Arabnews.com