The Zhitong Finance App learned that with changes in global crude oil supply and favorable development of refining returns, crude oil with higher sulfur content and density is becoming more and more popular in the Asian physical market. This situation rarely changes the normal situation.

Middle Eastern crude oil with medium density and high sulfur content, such as Oman and Upper Zakum, now has a higher spot premium than crude oil varieties such as Murbane. This situation is unusual because the latter is a lighter crude oil which is generally considered to be of better quality and rich in refined fuels such as diesel.

This new pattern reflects potential changes in supply and demand in the global crude oil market. OPEC+ production cuts have curtailed the supply of high-sulphur “dirty” crude oil, while US producers have been increasing exports of light crude oil. Vortexa Ltd. estimates that in the first three months of this year, Asia's daily supply of medium sulphur and heavy sulphur crude oil decreased by 920,000 barrels over the same period last year.

Meanwhile, according to Bloomberg Fair Value data, on the demand side, profit margins for high-sulphur fuel oil (mainly produced from medium sulphur grades) have increased, while profits from diesel production in Asia have declined.

Serena Huang, chief Asian analyst at Vortexa, said: “The supply of medium and heavy sulphur crude oil has been declining, which is driving up the price of these crude oils. “The cracking profits of intermediate distillates (mainly diesel) have been pressured by sufficient supply, as a result of strong refinery operations over the past few months exceeding demand.”

Other factors are also at play, according to traders. They said that although diesel has been showing signs of weakness globally, fuel oil made from heavier crude oil has been boosted by seasonal demand, and consumption for power generation in the Middle East has increased during the summer months.

Additionally, Abu Dhabi has been transporting more light crude oil while limiting the supply of its denser varieties of Upper Zakum for domestic processing. Elsewhere, Mexico's partial suspension of exports has also reduced the supply of heavy sulphur crude oil.

UBS commodities analyst Giovanni Staunovo said that from this point of view, the outlook depends on “OPEC+'s actions at the next meeting and the evolution of gasoline demand over the next few quarters.” This is expected to provide some support to drive a reversal of current trends over the next few months.