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Key oil market indicators are flashing signs of weakness in Asia as China’s Covid Zero policy continues to weigh on the demand outlook.
The discount of Dubai swaps to global benchmark Brent has widened since the start of the month, while the prompt Dubai time spread recently narrowed to the smallest backwardation since August. West Texas Intermediate has also flipped to a premium from a discount to the Middle Eastern marker.
Traders will be watching China’s buying activity this week as the physical spot market enters a more active period for December-loading crude cargoes.
Chinese President Xi Jinping on Sunday indicated no change in direction for the nation’s strict virus policy, presenting an uncertain demand outlook for refiners that recently received new quotas for fuel exports and crude imports.
Brent’s premium to Dubai swaps was at $6.71 a barrel Monday, compared with $5.08 on Sept. 30 when the new quotas were issued. The indicator is a signal of Asia’s overall demand strength. WTI futures were at a premium of 19 cents to Dubai oil on Friday, compared with a $2.31 discount at the end of last month.
