Slumping Chinese demand unlikely to impact Oman crude exports

Oman’s authorities are confident that there will be many takers for the country’s export blend of crude oil should China — currently the leading market for Omani crude exports — cut imports in the wake of slackening domestic demand stemming from the coronavirus outbreak.
The Asian economic powerhouse accounts for the lion’s share of Omani crude exports, lifting as much as 83 per cent of total exports of around 28.5 million barrels shipped by the Sultanate in December 2019. This compares with a November 2019 share of around 93 per cent, underscoring the importance of China as the predominant destination for Omani crude.
But with China expected to slash its global imports by as much as 20 per cent in the wake of slumping demand, exporting nations are grappling with the ramifications of these projections for their crude production and export plans. The implications for the Sultanate are unlikely to be severe because other countries are expected to pick up any shortfall in crude exports to China, according to a senior official of the Ministry of Oil and Gas.
Salim bin Nasser al Aufi (pictured), Under-Secretary, cited the composition of the export blend of Omani crude as particularly appealing to a wide array of refiners. “China is indeed the largest importer of Omani crude, but as a share of total imports, Oman is a very small contributor. Furthermore, Oman crude is sought after by many refineries. It’s one of those middle blends that can go into refineries processing heavy or light crudes, and so on. So it’s still strong in the market. But, of course, it will be impacted like all other crudes.”
Speaking to journalists on the sidelines of a forum on energy transition organised by the Omani French Friendship Association (OFA), the official acknowledged that the coronavirus epidemic has already begun to weigh down global crude prices.
“Oil prices are impacted by the fact that demand has gone down a bit. This is the driving season and if China is impacted then, by definition, the product will be impacted, refineries will be impacted, and consequently, producers of crude oil will be impacted as well. We have already seen that prices have gone down as a result.”
As with other crude benchmarks around the world, the Oman Crude Oil Futures Contract has lost nearly 20 per cent of its value since the start of 2020 — a slump primarily attributable to the coronavirus epidemic. The marker price for the benchmark on the Dubai Mercantile Exchange (DME) on Thursday was $54.46 per barrel, which was in sharp contrast to the year’s peak of $70.45 per barrel achieved on January 6, weeks before the outbreak made global headlines.
Meanwhile, non-Opec member Oman has added its voice to producing nations calling for early measures to arrest the slide in international crude prices. A news report by Reuters News quoted Oil & Gas Minister Dr Mohammed bin Hamad al Rumhy as supporting recommendations made by an Opec+ technical panel for a brief cut in output.
Oman is a member of Opec+, a grouping of non-Opec members led by Russia that have been supporting the cartel in a multi-year effort to shore up international oil prices. A technical panel, known as JTC, has proposed a provisional cut of 600,000 bpd until the end of June 2020.