Oil-Hungry Asia Lures Armada of Tankers Carrying U.S. Crude
(Bloomberg) -- A fleet of around 20 tankers laden with U.S. crude oil is expected to leave for Asia this month as the region continues to outpace the rest of the world in its recovery from the Covid-19 pandemic.
The vessels have been booked, some of them provisionally, to load crude from the U.S. Gulf Coast this month for delivery to the Far East, according to shipping fixtures and shipbrokers. Most are supertankers that can each carry about 2 million barrels of oil.
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Demand has rebounded in some parts of Asia, with Chinese crude processing matching a record in October. The nation’s independent refiners, meanwhile, have ramped up purchases after receiving new import quotas for 2021. Indian demand is also climbing as processors boost run rates.
Of the roughly 20 ships identified, many have been fully fixed but it’s still possible that some may not make the trip. That said, there is still time to book more ships to load this month, which could raise the tanker count to match the October high of 26. Unipec, the trading arm of China’s biggest oil refiner Sinopec Group, Vitol Group and Litasco SA are among those that have chartered vessels.
If all of the booked vessels make the December trip to Asia, the total volume will easily exceed that in November, when shipments to the region slumped 35% from October, according to ship tracking data compiled by Bloomberg. Traders said the arbitrage economics for U.S. crudes such as Mars and West Texas Intermediate were attractive when compared with some sour grades from the Middle East and also sweet varieties in Asia-Pacific.
American benchmark West Texas Intermediate’s discount to global marker Brent was $2.69 a barrel on Tuesday, compared with $1.74 at the end of October. The wider spread is also adding to the attractiveness of U.S. crude.
China’s Rongsheng Petro Chemical Co. chose to purchase U.S. crude last week over grades from the Middle East and Russia as offers for American shipments were more competitive. Earlier, a flurry of Asian buy tenders from the company and Indian refiners lifted the the price of benchmark Oman crude in an already bullish spot market.
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Cuts to term supplies from producers such as Iraq and the possibility of an extension in OPEC+ output curbs are also prompting buyers to seek alternative sources of crude from the U.S., the Mediterranean Sea as well as the North Sea, according to traders.
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