U.S. Light Crude Imports Surge Again

Posted by Joseph Keefe
Friday, January 15, 2016

U.S. imports of light crude from across the Atlantic are set to jump this month to their highest in more than two years, according to market sources and trade data that indicate global oil flows are being scrambled by the lowest prices in years and the end of the 1970s era U.S. export ban.

Shipments totaling some 500,000 barrels per day (bpd) are booked or underway from producers including Norway and Nigeria, a surprisingly rapid revival of flows that had dwindled to nearly nothing in 2014-2015, after the U.S. shale oil revolution got in full swing.

The arbitrage has opened as a result of an inversion in the spread between benchmark U.S. crude oil prices and global Brent. After five years at a discount due to the eruption of domestic production, U.S. futures are again trading at a premium of $1 a barrel or more in the months ahead.

Traders are split on whether the revival of the once-routine trans-Atlantic trade rout represents the new normal for markets, or a brief blip.

It may suggest that U.S. oil production is declining more quickly than some analysts estimate, with imports likely to grow as shale drillers slash spending and cut rigs. The U.S. Energy Information Administration said this week it expects output to fall by 700,000 bpd this year to 8.7 million bpd.

But some wonder if the import binge is the result of distorted signals in the futures market. U.S. crude jumped to a premium over Brent in late December, as investors bet the end of the U.S. ban on crude oil exports would eliminate the discount.

"The East Coast is especially sensitive to the Brent-WTI spread. It's cheaper to buy West African or North Sea barrels," a shipping analyst said.

While two U.S. crude cargoes have been exported since the ban was lifted, traders said few are likely to follow. Instead, the spread has made it profitable to import a flotilla of foreign oil - even with U.S. domestic crude stocks 95 million barrels higher than a year ago.

In December, imports of crudes and condensates coming from Africa that compete in quality with U.S. lighter grades, such as the Eagle Ford shale, rose to 10.75 million barrels, up 10 percent from a year ago, according to import flow data available via ThomsonReuters Eikon.

In January 2014, oil imports from Africa had touched their lowest level since 2009, with only 2.87 million barrels, according to the Energy Information Administration.

But this month, more than 15 million barrels of grades such as Nigerian Bonga and UK Brent are set to sail across the Atlantic, according to fixtures and trade sources, which would be the most for any month since 2013, U.S. data show.

With the booking of a Norwegian Ekofisk crude cargo this week, as much as 2.5 million barrels will come from the UK and Norwegian North Sea, traders said, matching the amount sent in August last year, which was the most in two years.

IMPORT REVIVAL

The armada will, ironically, cross paths with the first cargoes of U.S. domestic crude being exported to Europe in four decades after several companies raced to take advantage of the end to a longstanding ban on most overseas sales.

The first of two such shipments were aboard the Panamax tanker Theo T, carrying its historic cargo west into the Mediterranean on Thursday, according to ship tracking data. About a thousand miles due south, Suezmax tanker Nordic Freedom was heading east toward Philadelphia after loading around 1 million barrels of Bonga crude offshore Nigeria.

The unusual cross-shipment of two medium to light crudes highlights what traders say is the questionable financial viability of U.S. exports, which they say have been spurred by political reasons rather than arbitrage economics.

On Thursday, U.S. futures settled at a $1.08 a barrel premium to Brent futures, with the spread for later-dated futures trading even wider. June WTI futures settled at a $2.42 a barrel premium to Brent.

With Louisiana Light Sweet - a benchmark for waterborne Gulf Coast crude - trading at roughly a $1.50 a barrel premium to WTI and more than a $2 a barrel premium to Brent, it makes more economic sense to import barrels to the United States rather than the other way around, traders say.

BATTLE FOR MARKET SHARE

A higher demand of imported crude in the United States is arriving at a bad moment for producers of Latin American crudes, who have been struggling to maintain their market share amid deep budget cuts and weaker demand by U.S. refiners currently shutting deep conversion units for seasonal maintenance.

"More favourable pricing from Middle Eastern crude marketers and a greater acceptance of the new Basrah Heavy grade among US refiners could mean that higher values for sweet crudes are increasingly the new norm, with the recent changes in export legislation if anything helping to underpin this dynamic," said the firm JBC Energy in a report this week.

LLS has been trading this week at a $5.50 a premium to the medium sour Gulf Coast benchmark as refiners scramble to secure light, sweet barrels, its widest spread since mid-October.

Imports of Latin American heavy and medium grades are expected to fall sharply in January, following a 4 percent drop to 68.08 million barrels in December, compared with the same month of 2014, according to Reuters data.


By Marianna Parraga and Liz Hampton

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

DP World's H1 Volumes Rise

Ports operator DP World reported on Tuesday first-half 2016 gross container volumes up 1.2 percent on a like-for-like basis and up 2.5 percent on a reported basis.

Samil PwC Okays Hyundai's Management Improvement Plan

Hyundai Heavy Industries (HHI) is notified by Samil PwC, a local member of the global accounting firm PwC, that its 3.5 trillion won worth management improvement

Volvo Penta Names Brown Commercial Marine Sales Director

Dave Brown has joined Volvo Penta of the Americas as director of commercial marine sales.   In this new position, Brown will provide strategic and administrative

Contracts

LNG-fueled Bulker Ordered from Korea

Hyundai Mipo Dockyard (HMD) has signed a contract to build a 50,000 dwt bulk carrier with ILSHIN LOGISTICS. The project is a collaboration between POSCO and ILSHIN

Broad Declines drag Baltic Index down

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Tuesday on lower rates for capesize, panamax and supramax vessels.

MOL Makes Fleet-wide Migration to Fleet Xpress

Fleet Xpress will deliver data intelligence to drive smarter and greener shipping operations   26 July 2016: Inmarsat (LSE:ISAT.L), the leading provider of global

Tanker Trends

NASSCO Delivers Garden State to APT

Marking its seventh ship delivery in the span of just over a year, General Dynamics NASSCO has delivered the newly built ECO Class tanker Garden State for American Petroleum Tankers.

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

First LNG Vessel Transits Expanded Panama Canal

Today, the Panama Canal marked another milestone with the transit of the first-ever liquefied natural gas (LNG) carrier through its expanded locks.   Shell-chartered

Finance

China Joins UN Trucking Treaty

China has taken a major step towards establishing a speedy new "Silk Road" to Europe by signing up to a U.N. trucking treaty.   Fifteen years after joining the World Trade Organization (WTO),

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

Gulf Petrochem Group Expands European Bunker Operations

Gulf Petrochem Group, the UAE based global bunker supplier, has announced that it is now officially offering physical bunker supply in the port of Rotterdam, out of its new office based in Dordrecht.

Energy

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

Fuel Consumption, Emissions Monitoring Software Updated

As part of the ongoing Blue Star Delos Renewable Energy Innovation Project, Eco Marine Power (EMP) stated that the Aquarius Management & Automation System (MAS)

Los Angeles Pushes for Valero Terminal Improvements

The Port of Los Angeles has released an Initial Study/Notice of Preparation (IS/NOP) — the first step in the Environmental Impact Report (EIR) process — for a Marine

News

NASSCO Delivers Garden State to APT

Marking its seventh ship delivery in the span of just over a year, General Dynamics NASSCO has delivered the newly built ECO Class tanker Garden State for American Petroleum Tankers.

Long Beach Awards Sovcomflot for Green Shipping

PAO Sovcomflot earned the Green Environmental Achievement Award from California's Port of Long Beach, recognizing the shipper for its ongoing commitment to environmental stewardship.

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

Logistics

New Container Facility at Krishnapatnam Port

Krishnapatnam Port, India's largest all-weather; deep water port on the east-coast of India has inaugurated CONCOR’s - Port Side Container facility – a Government of India undertaking.

China Joins UN Trucking Treaty

China has taken a major step towards establishing a speedy new "Silk Road" to Europe by signing up to a U.N. trucking treaty.   Fifteen years after joining the World Trade Organization (WTO),

Gulf Petrochem Group Expands European Bunker Operations

Gulf Petrochem Group, the UAE based global bunker supplier, has announced that it is now officially offering physical bunker supply in the port of Rotterdam, out of its new office based in Dordrecht.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Navigation Offshore Oil Pod Propulsion Salvage Ship Electronics Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1398 sec (7 req/sec)