Mexico



Very usefull links



PW
Bookstore





News links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

 

Brent crude on the rise shuts window on European oil exports to Asia

 

 

 

By Florence Tang

SINGAPORE
Petroleumworld 01 25 2018

European crude oil loadings bound for Asia have dropped to their lowest in four years at the start of 2018 as rising Brent prices shut the arbitrage window, causing the premiums of similar Middle Eastern and Russian grades to rise as refiners make up the shortfall.

That refiners are willing to pay up for these grades underscores the demand in Asia for light crudes, which typically yield a high volume of diesel fuel when refined, in order to cash in on high profit margins for diesel and jet fuel.

The volume of crude loading in the North Sea and the Mediterranean for Asia slumped in January to 7.6 million barrels, less than half of the 17 million barrels in January 2017, Thomson Reuters trade flow data showed.

The drop reflects the widening of the premium of European benchmark Brent to Middle East benchmark Dubai, a proxy measure of the economic viability of shipping arbitrage cargoes from Europe to Asia.

The monthly average of the Brent-Dubai spread widened in November to above $3 a barrel, a level where the arbitrage window is considered shut, for the first time since June 2016, Thomson Reuters data showed. In mid-2017 that spread narrowed to below $1. DUB-EFS-1M

The spread widened as Brent prices rose after a pipeline disruption blocked supplies of Forties, a North Sea crude grade that is key in pricing the benchmark. The wider spread combined with rising tanker rates and strong European crude demand that kept supplies there to further cut arbitrage supplies to Asia.

“The arbitrage is blocked because of a wider Brent-Dubai spread,” said a trader with a North Asian refiner, adding that the lower arbitrage volume supports prices for light grades.

As western supplies of light crude, particularly Forties, have dried up, Asian refiners are turning to Middle East and Russian crude to profit from the higher middle distillate margins, driving up spot premiums, said multiple traders that participate in the market.

Murban crude, a light grade from Abu Dhabi, is currently valued at a premium of 23 cents a barrel to its official selling and has traded at a premium for the past six months, the longest streak since 2016. MUR-1Madn-

Russian Sokol crude, which has a high middle distillate yield, this month sold at its highest premium in a year, while ESPO was at its highest since February 2016 and Sakhalin Blend at the highest in two years.

Since the start of November, gasoil margins have climbed 32 percent while gasoline margins have slumped 17 percent and fuel oil discounts have more than doubled.

“Refining margins are good now so there's a strong pull for cargoes that can reach promptly,” said a Singapore-based oil trader.

Light crude demand has also risen after China decided in late 2017 to switch to low-sulphur diesel fuel for industrial uses, a third trader said.

 



Story by Florence Tan; Additional reporting by Jessica Jaganathan in SINGAPORE, Olga Yagova in MOSCOW and Alex Lawler in LONDON; Editing by Christian Schmollinger from Reuters.

reuters.com 01 24 2018

We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

 

 

 

TOP

Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.