China’s loadings of West African crude are set to slide by roughly 12 percent in October, from a record level the previous month, as expensive Brent prices limited Asian appetite.
The decline to China, at a three-month low of 1.29 million barrels per day (bpd), weighed on overall bookings to Asia, which fell to a three-month low of 2.15 million bpd.
In September, China’s loadings hit roughly 1.46 million bpd, the highest since Reuters began tracking the shipments in 2004.
But the strength of dated Brent, off of which West African oil is priced, hindered demand for October-loading cargoes. The spread between Brent and Dubai crudes DUB-EFS-1M hit a 10-month high of $2.59 a barrel in late September, making oil priced off Brent more expensive to Asian buyers.
Ehsan Ul-Haq, director at London-based consultancy Resource Economics, said backwardation in Brent, a market condition in which it is more attractive to sell oil immediately than store it, also limited sales of freshly loaded oil.
“Crude loses its value during its journey in a backwardated market,” Ul-Haq said, adding that many traders had also sold oil from storage as a result of the backwardation.
Additionally, demand earlier this year drove differentials for Angolan grades, such as Cabinda and Girassol, to their highest in three years, making them seem expensive to some buyers.
Cargoes for November loading already are selling slowly, and most buyers are pressing for a price decline. One key buyer, China’s Unipec, has been offering to sell its own Angolan oil, adding to some 25 cargoes that have yet to trade.
“I think we are at the peak,” one trader said of Angolan oil.