Refiners seek sweeter oil to meet rising petrol demand

LONDON: With more cars taking to the roads as coronavirus lockdowns ease, demand for lighter, sweeter oil more suitable for refining into petroleum is ticking up.

European refiners especially are moving away from sour varieties like Russian Urals, which have risen in price since a supply cut pact by producer countries made the grades scarcer, towards alternatives like US West Texas Intermediate (WTI), West African grades, CPC Blend and Azeri oil.

“Many discounted barrels from the US are arriving in north-west Europe,” one European importer of both Nigerian and US oil said.

“Demand is increasing from a bottom in April, and in July and August demand should be higher,” they added.

Although petroleum stocks in north-west Europe remain close to all-time highs and refining margins are still in the doldrums, the bargain price of lighter, sweeter crude is hard to refuse.

“Refiners are switching to sweet. And the arbitrage is open, so WTI is being offered in the Mediterranean and Asia with (strong) demand,” another trader said. Nigeria in particular hopes that slow sales brought on by volatility and long transit times to key markets will soon end.

Mele Kyari, head of the Nigerian National Petroleum Corp, said in June that the country’s oil would be the “grade of choice” with the rise in consumption being driven by petrol-rich crude.

Still, flows from West Africa’s top oil exporter to Europe have been the lowest in two years, according to Refinitiv Eikon data, while volumes of cheaper US light oil hover near all-time highs.