TOKYO: Japanese oil companies are shelling out more for crude bought under long-term contracts from Saudi Arabia and elsewhere amid strong appetite among China and other Asian economies. April-loading Arabian Light crude came to $38.48 a barrel, up 11% on the month and a third straight month of increases. The figure is the highest since the benchmark’s November-loading exports fetched $40.25 and also is up 50% from the low of more than 12 years for January-loading exports.
With dollar-denominated crude oil prices appearing undervalued amid the greenback’s depreciation against major currencies, Dubai crude’s spot price also has hovered in the lower-$40 range since late April, the highest in more than five months.
Chinese players are aggressively buying crude oil to ramp up gasoline output, a petroleum sales manager at trading house Mitsui said. China’s crude imports jumped 22% on the year in March. Strong Chinese sales of gas-guzzling sport utility vehicles are keeping oil refineries busy, the official said. Demand also is robust in India and other parts of Asia, industry insiders say.
U.S. demand for gasoline is exceeding year-earlier levels ahead of the summer travel season. West Texas Intermediate futures rose to the upper-$46 level a barrel at the end of April in New York as shale oil output declines.
Prices are rising on growing speculation that a supply-demand balance will be reached toward the second half of this year. Still, crude inventories in the U.S. remain high, and some oil producing countries such as Iran continue to increase output. “The oversupply will not improve substantially right away,” said Tsuyoshi Ueno, senior economist at NLI Research Institute. Japanese companies buy about 80% of crude imports under long-term agreements.
