The day-to-day market for physical oil cargoes is booming

  • Date: 14-Jan-2022
  • Source: Energy Voice
  • Sector:Oil & Gas
  • Country:Gulf
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The day-to-day market for physical oil cargoes is booming



The world’s physical oil market is running hot, offering a boost to bulls.

Prices for cargoes reaching oil refineries in Asia in two or three months’ time have been rallying strongly all over the world so far this year.

The time lag between when those shipments are purchased and when they’ll reach the world’s top importing region means the traders are effectively having to take a view on how the current omicron outbreak will play out, especially in China. Their upbeat outlook is further underpinned by the fact that two further demand headwinds – the Winter Olympics in Beijing and the Lunar New Year – will also be out of the way when the barrels arrive.

“The oil market is unbelievably resilient, and bulls are in full control,” said Tamas Varga, an analyst at PVM Oil Associates. “The physical crude market is way over the forward or futures contracts. It implies genuine prompt tightness.”

Demand globally has proved stronger than expected as the latest coronavirus variant inflicts a softer hit to the economy than anticipated, Fatih Birol, the executive director of International Energy Agency said Wednesday, mainly due to “milder Omicron expectations.” Supply disruptions have also helped, he said.

The resulting market strength is apparent