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Market Chatter: Europe Reportedly Draws Middle East Crude as China Pulls Back Oil Purchases

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A wave of Middle Eastern crude is heading to Europe next month as a sharp decline in Chinese buying frees up cargoes that would normally flow to Asia, helping offset supply disruptions caused by the conflicts in the Middle East, a Bloomberg analysis said on Thursday.

At least six supertankers carrying a combined 12 million barrels of crude from the UAE and Oman are scheduled to arrive in Europe next month, the report said, citing traders familiar with the shipments.

Most of the cargoes are bound for northwest Europe. An additional tanker carrying Iraqi crude is also signaling Rotterdam as its destination.

Oil prices initially jumped after the conflict erupted, as traders scrambled to secure supplies outside the Persian Gulf. The rally eased as China, the world's largest crude importer, sharply reduced purchases, making more Middle Eastern barrels available to other buyers.

The shift has created a rare arbitrage opportunity. The premium of Brent futures over Dubai crude swaps, known as the Brent-Dubai EFS, widened to nearly $10 a barrel last week from $6.75/bbl on May 29, Bloomberg said, citing data from PVM Oil Associates. A wider spread makes Dubai-linked Middle Eastern grades more attractive to European refiners.

China, which typically buys 70% to 80% of Oman's crude exports, reduced purchases of May-loading cargoes to about 65,000 barrels per day from more than 700,000 bpd in February, Bloomberg said, citing its ship-tracking data. China bought no UAE crude for May loading, compared with about 750,000 bpd in February.

The cargoes bound for Europe include at least 4 million barrels each of Murban, Upper Zakum, and Oman crude.

The flows are notable because Europe rarely imports crude from Oman or the UAE. No shipments of Omani crude to Europe have been observed since August 2023, according to ship-tracking data, while Europe had not imported UAE crude for a year before the Iranian conflict.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

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