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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Angolan oil struggles to sell on demand fears, weak margins

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LONDON: Angola, a key provider of oil to China, has suffered its slowest trading month this year as poor refining margins, high freight rates and subdued demand amid the trade war between Beijing and Washington curbed its sales.


Angolan crude had been selling out easily each month, with heavier grades especially coveted since similar Iranian and Venezuelan varieties evaporated due to US sanctions.


But a surplus of 8 cargoes struggled to find buyers as a new August programme was released on Monday — the first overhang of the year, traders said.


China typically purchases about two-thirds of Angolan barrels each month, making Africa’s second-biggest oil exporter an important barometer of the Chinese market.


Industrial output growth in China unexpectedly slowed to a more than 17-year low and investment cooled, official statistics showed on Friday, and crude oil imports slipped 8 per cent in May from an all-time high the month before. Asked if signs of slowing growth in China and a sluggish global economy were stinging demand, a top seller of Angolan oil said: “That’s inevitably part of it.” “The longer the trade war drags on, demand will inevitably be hit. Then again, a resolution to that could lead to a speedy turnaround,” the source added.


Crude purchases especially among Chinese independent refineries slowed down, East Asian market sources said, as they continued to digest inventories purchased in previous months.


“May data has thus far pointed to sluggish demand, with imports contracting sharply — and this is before the new round of bilateral (US-China) tariffs kick in,” consultancy Energy Aspects wrote in a note, which still put demand up at 500,000 barrels per day on the year despite the weakening outlook.


China ramped up imports of Iranian oil in April before cutting them off due to tougher US sanctions, and Energy Aspects said it expected new commercial storage to come online. “The global economy and trade issues are a bit macro for us,” one Chinese buyer said, noting July purchases closer to home than Angola such as from Gulf producers.


“But anything signalling lower growth and demand, none of this geopolitical stuff is good.” Margins on the kind of refined products made from heavier Angolan crude such as jet fuel plunged to a six-week low of $12.93 a barrel over Dubai crude at the end of May before recovering to $14.50 this week.


The premium of Brent crude to Dubai also reached its highest levels in over a year, making Middle East oil a more attractive prospect, before settling down again.


China’s lack of interest became clear early in the trading cycle as Chinese state oil trader Unipec declined to make any bids, setting the stage for a price slide that has now prompted somewhat buying by Chinese state and independent refiners. — Reuters


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