Japan, S. Korea refiners join China in buying Canadian TMX oil
Asia's crude oil imports from Canada's newly expanded Trans Mountain pipeline will rise in September as major refiners in Japan and South Korea and a refinery in Brunei have bought their first cargoes alongside China, multiple trade sources said.
The purchases come after exports commenced from the expanded TMX pipeline in May, which will triple the flow of crude from landlocked Alberta to Canada's Pacific coast to 890,000 bpd. Owned by the Canadian government, the pipeline gives Canadian producers more access to U.S. West Coast and Asian markets while providing Asian refiners an opportunity to diversify their imports.
Chevron will split a Cold Lake crude cargo between its South Korean joint venture refiner GS Caltex and Japan's top refiner ENEOS, traders said. ENEOS bought 250,000 bbl while GS Caltex takes the remaining 300,000 bbl, they added.
South Korea's top refiner SK Energy, a unit of SK Innovation, bought a cargo from Unipec while Hengyi Petrochemical, a refinery operator in Brunei, also purchased a cargo from PetroChina, traders said.
The cargoes, of 550,000 bbl each, to be delivered in September were sold at discounts of between $5/bbl and $6/bbl to ICE Brent, they added.
Meanwhile, Chinese private refiner Rongsheng Petrochemical has also purchased another two TMX cargoes from ConocoPhillips and Vitol after buying two cargoes via a tender, traders said.
Rongsheng's four Canadian Access Western Blend (AWB) crude cargoes will be delivered to Zhoushan, in eastern China, in September, they added. These companies typically do not comment on commercial deals.
Cold Lake and AWB are heavy sour crude with API gravity of 21°–22° degrees and contain 3.5%–4% sulfur. Most North Asia refiners prefer Cold Lake as AWB is more acidic, which could cause corrosion in plants, traders said.
"Canada's TMX crude attracts interest from Asian buyers who are keen to secure cheap supplies of heavy grades but do not have access to U.S.-sanctioned Venezuelan crude," said Muyu Xu, a senior crude oil analyst at analytics firm Kpler. "It will still take some time for refiners to experiment with and test TMX crude as the first few cargoes have just arrived."
TMX crude exports, expected at 350,000 bpd–400,000 bpd, will mostly compete with heavy grades from Latin America and the Middle East, Xu said. Cold Lake is about $10/bbl cheaper than Iraq's Basra Heavy for deliveries to China, she added.
TMX crude exports in June were at 343,000 bpd, with 187,000 bpd to China, 60,000 bpd to India and the remainder to U.S. West Coast refineries, Kpler data showed.
Cargoes to China are expected to be discharged later this month at PetroChina's Qinzhou and Jieyang refineries as well as Sinopec's Maoming plant in southern China.
India has yet to purchase more Canadian crude due to abundant Russian supplies, traders said, after Reliance Industries bought its first TMX cargo from Shell for July delivery.
Some traders are also watching out for any impact from the wildfire season on Canadian oil production.
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