Asian-Pacific refiners take advantage of US oil glut

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Refiners from the Asian-Pacific are lining up to take advantage of the lower-priced US oil as OPEC countries continue to cut output.

Shipments to Japan and South Korea surged between March and May, but with the recent price slump, they are once again turning to US crude. Japanese refiners JXTG and Cosmo Energy have bought US cargoes, which will arrive in September, ahead of the winter season. JXTG purchased 1 MMbbl of US Mars crude and Cosmo bought a mixture of WTI Midland and Domestic Sweet blend.

Traders expect between 2 MMbbl and 4 MMbbl of North Sea Forties to load this month, heading off to South Korea.

ExxonMobil is Sending US Crude to Sri Racha for its Thailand refinery which should arrive in late July. Crude is also being imported to China, Taiwan and Australia.

This week, Indian Oil Corp announced they will import US crude for the first time, to be delivered in October. IOC bought 1.6 MMbbl of US Mars crude. A second Indian refiner is planning to also buy US crude and has issued a purchase tender.

The rise of Asian-Pacific refiners seeking US crude can only be good news for the US, which has continued to increase production, causing a glut in the market. The lower prices caused by the glut are enticing these refiners, which will in turn ease the glut, and stabilize the market.

Oil traders in the US see July as the last best opportunity this year to ease the glut of oil. According to the US Energy Information Administration, July is usually a big month for drawdowns. Over the last 5 yr, the EIA stated, inventories of crude oil have dropped by an average of 2.9 MMbbl per week in July.

If the glut does not subside in July, analysts warn, it may dash the hopes of many in the industry of seeing higher prices by the end of the year.

As of now, July is off to a great start for US crude exports, and as Asia continues to top the list of oil importers, the glut of US crude should subside.

The Author



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