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U.S. oil shipments to Asia may hit new high in July, cool Mideast crude prices

Reuters  |  SINGAPORE 

By Florence Tan

(Reuters) - The volume of U.S. arriving in is expected to hit a new high in July as Asian refiners sought arbitrage supplies to replace Middle Eastern crude after prices for Gulf grades rose, traders said on Wednesday.

U.S. crude arriving in hit an all-time high of close to 25 million barrels in May with cargoes discharging in China, South Korea, Singapore, and Malaysia, according to trade flows data on Eikon.

The volume dips to about 19 million barrels in June, but is set to rebound again in July after U.S. crude futures slipped to the widest discount in three years against Brent this week, according to traders and Eikon data.

The drop in U.S. crude prices coincides with rising values for in and has opened the arbitrage window, traders said.

Close to 10 supertankers, each carrying 2 million barrels of crude, have been lined up to load in the for Asia, two of the traders said. These are expected to arrive in July, they said.

"WTI Midland is coming across," a third said, adding that refiners such as JXTG Nippon, and have bought U.S. crude.

Last week, Indian state-refiner (IOC) bought 3 million barrels of Louisiana Light Sweet and WTI Midland crude for loading in June.

South Korea's second-largest refiner has bought 5 million barrels of U.S. crude, mainly Eagle Ford and WTI Midland, for June to August delivery, up from 4.75 million barrels in the first five months this year, a said.

Some of the popular U.S. grades in Asia such as WTI Midland, Mars and Canyon can now compete with grades such as Murban and in Asia, traders said.

WTI Midland crude delivered to is priced at a premium of close to $5 a barrel to quotes, comparable with Abu Dhabi's Murban, while Mars crude cargoes are being offered at $1.50 a barrel above quotes, competitive with Oman, they said.

Light sweet WTI Midland comes from the Permian basin, a region which was a key contributor to in June. The grade's cash discount hit the lowest in four years earlier this month.

"The value for Midland is better than Murban for cargoes landing in China," a with a Chinese company said, adding that the influx of U.S. may put some downward pressure on crude prices.

The Middle East crude market has been underpinned by supply cuts by the Organization of the Petroleum Exporting Countries, peak summer demand and as fears of disruption in Iranian supplies after the withdrew from a global nuclear pact fueled sentiment.

(Reporting by Florence Tan, additional reporting by in SEOUL and Osamu Tsukimori in TOKYO, Editing by Sherry Jacob-Phillips)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 22:00 IST