Exports of U.S. crude oil to Asia appear to be starting to struggle under the weight of a narrowing discount for its domestic benchmark crude to international grades and efforts by other suppliers to maintain competitiveness.
Vessel-tracking and port data suggest Asian imports of U.S. crude were equivalent to about 560,000 barrels per day (bpd) in February, down sharply from 676,190 bpd in January.
March’s figure may be even weaker with data compiled by Thomson Reuters Oil Research and Forecasts pointing to Asian imports of only about 290,000 bpd.
While these estimates are subject to revision, the March data shouldn’t change dramatically given any cargo due to be offloaded in Asia this month would have to have left a U.S. port by now, or at least within the next day or so.
The main culprit for a slowdown in U.S. shipments to Asia is likely the narrowing discount of benchmark U.S. West Texas Intermediate (WTI) to Brent, the light crude grade used as a price marker for the rest of the world.
The discount of WTI to Brent CL-LCO1=R was $3.11 a barrel at Monday’s close, slightly more than $3 on March 1, which was the smallest gap in seven months.
The spread between the two benchmarks blew out to $7.07 a barrel in late September in the aftermath of Hurricane Harvey, which knocked out refineries along the U.S. Gulf Coast, cutting demand for WTI crudes.
It remained relatively wide for several months after that, ending the year at $6.48 a barrel, but the differential has been steadily narrowing this year in response to strong demand from U.S. refineries and from overseas buyers.
Asian imports of 726,600 bpd of U.S. crude in November and January’s 676,190 bpd were the strongest two months on record, showing that the region’s traders were quick to take advantage of the weakening of WTI relative to Brent.
Source: Reuters
