Algerian Crude Returns to US East Coast

Maritime Activity Reports, Inc.

April 20, 2016

Phillips 66 has purchased a cargo of Algerian crude oil for its Bayway refinery in New Jersey for the first time since 2013, two sources said, the latest U.S. refiner on the East Coast to shun domestic crudes in favor of cheaper imports.

The rare shipment suggests East Coast refiners are ramping up efforts that started in the past year to shift to a diet of foreign crudes as the era of cheaper domestic supplies continues to fade.
A Panamax-sized vessel named Energy Century carrying about 433,000 barrels of Saharan Blend crude oil arrived in New York Harbor on Monday after leaving the Algerian port of Skikda on March 29, according to Reuters Eikon shipping data.
BP was listed as the charterer, shipping records show.
The oil, which is very similar to U.S. Bakken crude, is headed to the 238,000 barrel-per-day Bayway refinery owned by one of the biggest U.S. independent refiners, according to two sources familiar with the plant's operations. Phillips 66 declined to comment.
Sarah Emerson, a managing principal at ESAI Energy LLC, says the return of Algerian crude to the East Coast was expected given the collapse of the discount U.S. crude once enjoyed against Brent, the global benchmark.
Low prices make it nearly impossible for U.S. shale producers with crude that has to travel thousands of miles by rail to compete with foreign crude, which costs less to ship.
"Price dictates the flow of oil," Emerson said.
The move marks a return of Algerian crude after years of being shunned from one of the world's biggest energy markets as the U.S. shale revolution made it cheaper to buy locally.
Phillips 66 has also routine crude deliveries from Canada and West African nations such as Gabon and Angola, according to the U.S. Energy Information Administration (EIA).
Phillips 66, like other East Coast refiners, built rail terminals to unload Bakken crude flowing from North Dakota.
Miles of trains flowed to the East Coast daily as Bakken traded at a deep discount to Brent, but the discount has vanished in recent months amid the prolonged oil rout, and so have the trains as they have imported more.
For Phillips 66, it is the first purchase of Algerian crude for its Bayway refinery since December 2013, according to the EIA.
The last time Algerian crude was imported to the East Coast was in July 2014, EIA data shows.
Before the U.S. shale revolution, Algerian crude was a mainstay on the East Coast. In 2012, more than 15 million barrels, or roughly 40,000 barrels per day (bpd), were imported to the East Coast.
Overall, U.S. rail traffic of crude oil and other petroleum products is down 21 percent in the first quarter of this year compared to the same stretch last year, according to the American Association of Railroads.
The East Coast imported 807,000 bpd in January, the highest monthly total since September, according to the latest data from EIA.
(Reporting by Jarrett Renshaw; Editing by Alan Crosby)
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