Middle Eastern crude prices are strengthening as Asian refiners step up purchases, absorbing rising spot supply amid expectations of prolonged regional tightness, according to Kpler in a Tuesday note.
Middle Eastern producers increased tenders for cargoes loading over the next two to three months, signaling more near-term supply, while stronger award prices point to firm buying demand, Kpler Senior Crude Oil Analyst Muyu Xu said.
In its ninth tender, Adnoc sold about 16 million barrels of offshore crude, including Upper Zakum, Das and Umm Lulu, to buyers across China, Japan, India and Malaysia.
The cargoes sold at about $5 per barrel to $8/bbl above the Dubai benchmark for ship-to-ship delivery off Fujairah, up from $5/bbl to $6/bbl a week earlier.
On delivery to Northeast Asia, the premium reached about $12/bbl to $13/bbl, according to the note.
QatarEnergy awarded Qatar Land and Qatar Marine cargoes to a Thai refiner at about $6/bbl above the Dubai benchmark.
Iraq's state-owned SOMO sold roughly 10 million barrels of Basrah Medium and Basrah Heavy for September-October loading.
Asian buyers paid more than $10/bbl above the Dubai benchmark for the Iraqi cargoes on delivery, despite increased Middle Eastern spot offerings over the past two weeks, Kpler said.
Saudi Aramco also offered early-September-loading Arab Medium and Arab Heavy cargoes for ship-to-ship delivery off Fujairah, adding to the region's recent wave of spot supply, Kpler said.
Stronger buying may reflect shifting procurement and inventory strategies among Asian refiners, particularly in China, as supply concerns spur purchases and strong product cracks support higher runs, Kpler said.
PetroChina, Sinochem and a Chinese independent refiner joined the latest tender round, compared with Chinese refiners' lower bids for an Adnoc tender just two weeks earlier, Kpler said.
China's onshore crude inventories fell to 1,172 million barrels, below year-earlier levels, though the stockpile still covered about 88 days of refinery demand based on August intake of 13.26 million barrels per day.
Faster inventory draws and expectations for higher refinery throughput in coming months are shrinking China's supply cushion, potentially giving energy security greater weight in purchasing decisions, Kpler said.
Limited Iranian crude supply is creating operational uncertainty for Chinese independent refiners, or teapots, which have been selling large volumes of gasoline and diesel to state-owned refiners, helping the latter boost clean product exports and margins.
State-owned refiners may sustain high product exports in September, while reduced teapot supply could require higher refinery runs and more reliable crude feedstock, Kpler said.
Other Asian refiners have strong incentives to maintain output, with middle-distillate cracks near $60/bbl over Dubai swaps. Some reduced spot buying, likely reflecting earlier term or arbitrage purchases.
Refiners with ample inventories may delay prompt purchases of cheaper barrels, but tightening dynamics in the Middle East could prompt others to secure feedstock.
Prompt Dubai prices and Middle Eastern crude differentials should remain supported despite higher supply, while stronger Asian buying may slow inventory declines without rebuilding stocks, Kpler said.