East-West Divide in Oil Prices Draws Crude to Asia

SourceThe Wall Street Journal
SectorOil & Gas
CountryMiddle east

There is a new disconnect between oil prices to the east and west of the Suez Canal, reflecting the divergence between resurgent crude demand in Asia and sluggish consumption in the U.S. and Europe. Fueled by China, and more recently India, oil consumption in Asia has rebounded since the pandemic eviscerated demand this spring. In the West, stop-start lockdowns have impeded travel and the recovery is expected to falter again during the current surge of coronavirus infections. The disparity has nudged prices for Dubai crude, a basket of Middle Eastern oils mainly bought by Asian petroleum refiners, above West Texas Intermediate, the U.S. gauge for crude, and Dated Brent, the benchmark for the physical-oil market in the Atlantic. Before the coronavirus pandemic, this was a rare dynamic.

Dubai is typically cheaper because most Middle Eastern crudes are inferior in quality to the light, sweet oil drilled from under the North Sea and the U.S.’s Permian Basin. Since September, however, Middle Eastern crudes have regularly fetched a premium. On Wednesday, Dubai crude cost $43.80 a barrel, according to S&P Global Platts, making it $1.06 a barrel more expensive than Dated Brent. In 2019, Dubai stood 85 cents-a-barrel below Brent, on average. ...read more...