 "Oil & gas")
Oil traders from around the world, including the United States, Britain and Brazil, have tripled their sales to Asia as they take advantage of an emerging supply gap following Opec-led production cuts announced late last year.
Around 30 supertankers have this month made long-haul trips to ship crude oil from the Americas, the North Sea and the Mediterranean to refineries across Asia, the world's biggest and fastest-growing consumer, data extracted from Thomson Reuters Oil Research and Forecasts shows.
The unusual movements follow the decision late last year by the Organisation of the Petroleum Exporting Countries (Opec) and other producers including Russia to cut production by almost 1.8 million barrels per day (bpd) during the first half of this year in a bid to rein in global oversupply and prop up prices.
Companies most involved in the long-haul deals include major oil producers such as BP and Royal Dutch Shell, private commodity traders Trafigura, Vitol and Mercuria, and Chinese refiner Unipec, trading sources say. Energy and mining giant Glencore, Azerbaijan's state-oil firm Socar and Brazil's Petrobras have also been involved.
Taking advantage of relatively low freight costs and regional crude oil price differentials - known as arbitrage, or arb - traders can profit from supply shortages in one region and oversupply in another.
West Texas Intermediate (WTI) crude futures CLc1, for example, currently trade at around $54.50 per barrel, while international benchmark Brent crude LCOc1 costs $56.90 - a Brent premium over WTI of $2.40 a barrel, compared with near parity in late November, just before Opec announced its cuts.
“The Opec cuts have ... led to an open arb for long-haul cargoes, leading to a rise in long-haul crude imports (which) make up for the decline in Opec (supplies),” said Tushar Bansal, director of Ivy Global Energy, a Singapore-based consultancy.
The cuts are an Opec policy reversal after two years of pumping out oil and keeping prices low as the cartel sought to squeeze rival exporters.
“Opec production cuts... created distortions in the Asian crude market, changing global trade patterns,” BMI Research said in a note to clients.
Opec cedes market share
Helping fill the Opec gap, crude shipments to Asia from the United States, Britain, Brazil, and even war-torn Libya jumped to over 35 million barrels in February, or1.26 million bpd, from 10.4 million barrels in October, or 336,000 bpd, the data shows.
For Opec, which typically meets around 70 per cent of Asia’s oil demand, that means a five per cent loss of market share since October. “Under current oil market conditions, Opec risks losing market share with further production cuts,” said Carole Nakhle, director of advisory firm Crystol Energy in London.
Although Opec's relationship with customers in Asia tends to be good, refiners in North Asia’s consumer hubs of Japan, China, and South Korea say they will readily turn to other suppliers in order to meet their needs.
