Asia oil buyers turn to US in hunt for cheap supply
SINGAPORE/NEW YORK (Reuters) — Asia is set to ramp up crude oil imports from the United States in late 2017 and early next year, with buyers searching out cheap supplies after hurricanes hit US demand for the commodity at a time of rising production in the country.
As many as 11 tankers, partly or fully laden with US crude, are due to arrive in Asia in November, with another 12 to load oil in the United States later in October and November before sailing for Asia, according to shipping sources and data on Thomson Reuters Eikon.
US West Texas Intermediate crude benchmark stands at its largest discount in years against the Atlantic Basin's Brent, with local appetite curbed as US refineries are still pushing to get back on track in the wake of hurricanes such as Harvey.
"Between November and January, there is a very big volume of US crude heading to Asia," said a Chinese trader who has bought 4 MMbbl of medium-sour US oil to arrive in December. He declined to be identified as he was not authorized to speak with media.
The price-spread between the two crudes had already pushed US crude exports to a record 1.98 MMbpd by late September, according to the Energy Information Administration in the United States.
Exports in the next two to three weeks could hit 2.2 MMbpd, Marco Dunand, chief executive of trading house Mercuria, said last week.
That has also been driven as some Asian governments look to diversify supply sources and reduce trade surpluses with the world's top economy. India joined China, Japan and South Korea when it imported its first US crude in October.
And high premiums for Middle Eastern grades of crude are also stoking Asian appetite for US supplies.
"US medium sour grades can replace most Middle East grades and the light sweets may replace some African crude," said the Chinese trader.
DESTINATION ASIA
The tankers to arrive in Asia in November include eight Very Large Crude Carriers (VLCC), capable of carrying 2 MMbbl of oil each, and three Suezmaxes that can load half that volume, according to shipping data in Eikon.
China remains the largest buyer with four tankers, followed by three to South Korea and two to India. The remaining two could head to Singapore, the data shows.
Unipec, the trading arm of Asia's largest refiner Sinopec, dominates the trade with imports set to hit 5.7 MMt in 2017, up from 3.6 MMt in the first eight months, a source familiar with the matter said. The company buys about 8 MMbbl of US crude on average per month, the source said. Reuters could not immediately reach the company for comment.
Another 12 tankers are provisionally chartered to load US oil in October and November, the data showed.
Four of these are supertankers chartered by South Korean buyers to load Mexican and US crude. The country's top refiner SK Energy has bought 6.5 MMbbl of US crude to be delivered between November and January.
Several Indian refiners have also purchased their first US crude for delivery in the fourth quarter, including the country's largest refiner Indian Oil Corp.
Japan's largest refiner JXTG Holdings has provisionally chartered a VLCC to load crude in Mexico and the US Gulf in November. The company declined to comment on individual trades.
Reporting by Florence Tan in Singapore and Catherine Ngai in New York; Additional reporting by Jane Chung in Seoul and Osamu Tsukimori in Tokyo; Editing by Joseph Radford
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