US crude oil shipments to Asia suffer from high shipping rates

Traders said this week that the economic incentive for Asia to import oil from the US Gulf Coast has ended with the rise in the cost of booking giant tankers on this shipping route in light of a jump in ship booking prices.

With the halt of arbitrage operations for US shipments, Asian refiners may make up some of the difference from similar crude from the Middle East after Saudi Arabia, the largest producer in the region, reduced its sales prices for the month of February. It is expected that the reduction will spread to other raw materials in the region. Stimulating demand for crude oil in the Middle East may support prices that have declined in the region in previous months.

The cost of chartering a very large oil tanker capable of loading two million barrels of oil from the United States to Asia jumped to about ten million dollars this week from about eight million dollars last week, according to traders and data from ship brokerage firm Simpson Spence & Young.

Traders said that the rise in shipping costs led to the premium for US West Texas Intermediate crude exceeding four dollars a barrel over Dubai prices based on cost and freight for delivery in April, from about two dollars last week.

Several market traders stated that this led to an increase in the premium for US West Texas Intermediate crude by one dollar per barrel over UAE Murban crude, which is somewhat similar to West Texas Intermediate crude, for delivery to Asia, up from the same price or a slight discount last week. .

An oil trader in Singapore said, “We have not heard of any deal (on WTI) at the new prices.” There is no room for arbitrage now.”

An informed source, ship brokers and data from Kpler said that the tanker market has become strong after the South Korean company Sinocor Merchant Marine booked four giant oil tankers last week to transport oil from the United States to China in the period from January to March.

The data showed that rental prices ranged between $8.39 and $9.7 million

Omar Nokta, an analyst at Jefferies, said in a note, “The high level of spot transactions outside the US Gulf led to a lack of ship availability in the Atlantic Basin, which led to higher prices.”

Traders and analysts said that Saudi Arabia’s reduction in February prices may increase demand for shipping, as some refinery companies are expected to change their loads next month to receive more Saudi oil and increase their total purchases from the Middle East.

Kpler data showed that US crude shipments rose to a record level in 2023, despite expectations that volumes would decrease in January after Murban exports rose. This trend is likely to continue in the near term as shipping increases

A trader at a North Asian refining company said, “The rise in shipping prices was a shock… The direct result is that American crude is no longer able to compete in Asia.”