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Unipec bought as many as 18 cargoes of Upper Zakum this month
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It’s clear to me this is indicative of a wider demand rebound
China’s biggest oil trader Unipec has piqued market interest after some unusual crude buying as investors and analysts seek clues on the pace of recovery in the world’s top importer. Unipec, the trading arm of state refining giant Sinopec, this month bought as many as 18 million cargoes of Abu Dhabi’s Upper Zakum crude for loading in March, according to traders. That’s equivalent to 9 million barrels, which traders say exceeds the company’s usual appetite for the grade. The strength of China’s recovery is in the spotlight as industry and Wall Street analysts try to quantify the impact of Beijing’s rapid unwinding of Covid Zero on oil demand. It’s unclear if the barrels bought by Unipec will be supplied to Sinopec’s vast refining network for processing, or resold, and traders were mixed in their conclusions about the implications of the large haul. Some said increased interest in Upper Zakum can be attributed to the company’s halt in Russian ESPO purchases since late-2022, coupled with a rise in downstream demand for oil products. Others said Unipec may see value in the grade that’s linked to the pricing of Dubai crude, Asia’s main benchmark. NN: After all its is a binary trade.
Chinese Oil Demand Seen Hitting Record on Covid Zero Pivot
Chinese oil consumption is expected to hit a record this year as the world’s biggest importer leaves the straitjacket of Covid Zero behind, bolstering the global demand outlook and aiding prices. Daily demand — which contracted last year — will climb by 800,000 barrels a day in 2023, according to the median estimate of 11 China-focused consultants surveyed by Bloomberg News. That would take consumption to an all-time high of about 16 million barrels a day, the survey showed. Crude’s fortunes over the coming year hinge to a major extent on China, as well as on decisions by OPEC+, the impact of sanctions on Russian flows, and the arc of monetary policy. Oil’s bulls, of which there are many, have built a large part of their outlook on growth in Chinese demand, with Goldman Sachs Group Inc.’s Jeffrey Currie saying that crude is the “best reopening play”. “Demand recovery is expected to accelerate from the second quarter onward as traffic rebounds and the number of flights, especially international flights, gradually recovers,” said Yitian Lin, research associate of oils and refineries at Wood Mackenzie Ltd., who estimates daily demand will rise by 970,000 barrels. Other market watchers have also flagged prospects for a sharp rebound in consumption. The International Energy Agency, which advises major economies, forecasts that global demand will grow by 1.7 million barrels a day in 2023, citing expansion in China as well as India, according to its December outlook. Brent crude — the global benchmark — traded near $85 a barrel on Friday, headed for a weekly gain. Still, that’s well down from a peak near $140 following Russia’s invasion of Ukraine. Goldman’s Currie expects prices to hit $110 by the third quarter. ING Group NV, and UBS Group AG are also positive. Data Friday showed that China’s crude imports hit a record for the month of December as shipments in the final quarter of last year came in almost a fifth higher than the preceding three months. At the same time, Chinese buyers have been tapping markets in North America, West Africa, the North Sea and Mediterranean looking for oil for arrival in March and April.