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U.S. oil exports to Asia set to rise in second-quarter as freight costs fall

Reuters  |  SINGAPORE/NEW YORK 

By and Devika Krishna Kumar

SINGAPORE/NEW YORK (Reuters) - U.S. exports to are set to rise in the second quarter as sellers cut prices following sharp drops in freight rates and expected weaker demand in the United States, trading and shipping sources said.

Offers for U.S. crude arriving in in the second-half of March or April are about 50 cents a barrel lower than a month earlier, they said, making it more competitive against from the

U.S. crude grades popular with Asian buyers include light oils such as Intermediate (WTI) Midland and Eagle Ford, as well as Mars and Canyon among heavier grades.

The has boosted crude sales to Asia, helped by a steep discount for U.S. to the global benchmark Brent.

"There is the potential for Q2 U.S. crude exports to to be higher year-on-year if the WTI/Brent spread remains in the range it has in recent months and with the lower freight rates," said David Arno, at analytics firm

"There are a few variables, though, with the ongoing U.S-trade war and the potential for the waivers for Iranian crude exports to Asian countries to not be extended."

A U.S. decision not to extend waivers allowing some Asian countries to import Iranian oil despite sanctions would boost demand from South Korea, Taiwan, Japan, China, and

FREIGHT RATES FALL

The rate for chartering a Very Large Crude Carrier, to ship 2 million barrels of oil from the (LOOP) in to has fallen more than 40 percent from late-October to about $5 million, data on Refinitiv's Eikon shows.

VLCC prices spiked late last year during the winter season and as buyers boosted imports ahead of renewed sanctions.

Enquiries for ships to send oil from the or to Asia have picked up, while Intermediate (WTI) at - also known as MEH - and Mars are seeing strong demand from Asia, U.S.-based trade sources said.

Companies looking for ships include P66, Mercuria, Reliance and while has a VLCC on the way to Asia, said one source.

More U.S. crude could also be freed up for exports as U.S. refineries prepare to shut for seasonal maintenance from February before ramping up for the summer driving season, the sources said.

In Asia, offers of WTI Midland crude for delivery to have fallen by 50 cents a barrel to about a $2.50 a barrel premium to the benchmark, while Eagle Ford crude can be delivered to Asia at about $3 a barrel premium, the sources said. U.S. Mars crude has become cheaper than on delivery, they said.

The U.S. price cuts have also depressed spot prices for grades such as Murban and Oman, the sources said.

UNCERTAINTY

While demand from big U.S. - and - is expected to remain strong, Chinese buyers are likely to stay cautious amid trade talks with the

"Right now, we see one cargo headed for China, which set sail on Dec. 31 and is set to land in mid-February. It marked the first U.S. crude export to since late September, and only the second one since late July," Genscape's Arno said.

Two VLCCs that loaded U.S. crude in December had been scheduled to head to China, shipping data on Eikon showed. But VLCC Nasiriyah is now heading to and VLCC Manifa is set for Singapore, said.

(Reporting by in and Devika in NEW YORK; editing by Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 09 2019. 12:50 IST
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