Spot premiums for Middle Eastern crude have surged to their highest levels in over two years, driven by robust demand from major importers China and India seeking to substitute for sanctioned supplies, according to traders.
On Friday, the Biden administration implemented extensive sanctions aimed at Russian producers and tankers, which has disrupted the supply chain from the world’s second-largest oil producer and restricted the availability of shipping vessels.
This situation has prompted a rush among buyers in China and India, the largest and third-largest importers globally, to secure alternative oil supplies and tankers.
In light of recent transactions, QatarEnergy has significantly increased its term price for al-Shaheen crude oil scheduled for loading in March to $3.81 per barrel above Dubai quotes, more than doubling the price from the previous month. This adjustment follows the awarding of two cargoes to Totsa at premiums ranging from $3.70 to $3.80, as reported by trade sources. Totsa is the trading division of the French multinational TotalEnergies.
The March term price represents the highest level since October 2022 for cargoes scheduled for loading in December of that year.
These transactions occurred after premiums for Middle Eastern benchmarks, including Dubai, GME Oman, and IFAD Murban, surged this week to nearly $4 per barrel, marking the highest levels in over a year.
In other transactions, Unipec acquired a March-loading Qatar Marine crude cargo in QatarEnergy’s tender at a premium exceeding $3 per barrel relative to Dubai quotes, a tenfold increase compared to the previous month. Sinochem purchased a March-loading Abu Dhabi Upper Zakum cargo from Cepsa, while Indian refiner Hindustan Petroleum Corp (HPCL.NS) procured 1 million barrels of February-loading Iraqi Basra Medium crude from Litasco at a premium of $1.90 per barrel above Dubai quotes, according to trade sources.
Premiums for lighter grades have also seen an increase. QatarEnergy sold a March-loading Land crude cargo at a premium exceeding $2 per barrel above Dubai prices to PTT, as reported by traders. All Qatar cargoes are comprised of 500,000 barrels each.
Typically, companies refrain from commenting on commercial transactions.
Before the sanctions imposed on Russian oil on Friday, Chinese refiners were actively looking to substitute Iranian supplies due to apprehensions that the incoming Trump administration would intensify embargo actions against Tehran.
The International Energy Agency stated on Wednesday that the recent U.S. sanctions against Russia could greatly impact the nation’s oil supply chains; however, it has chosen not to incorporate these measures into its current supply forecasts.
