Taiwan Set to Import First Cargo of US Gulf Coast Crude

Opportunities to export US crude to new destinations are now emerging as logistics constraints ease, making arbitrage economics more and more favorable. Higher exports come as OPEC and non-OPEC members have recently agreed to extend their production cuts by another nine months from June.

The lifting of the ban on US crude exports at the end of December 2015 has seen US crude exported far and wide over the last year and a half. Opportunities to export US crude to new destinations are now emerging as logistics constraints ease, making arbitrage economics more and more favourable.

These higher exports come as OPEC and non-OPEC members have recently agreed to extend their production cuts by another nine months from June, taking the export reductions until March 2018.

In February, the US exported a record-high 1.1 million b/d of crude oil, 30% of which went to China. In March, data for which is the latest available, this fell slightly to 834,000 b/d although it was still significantly higher than the roughly 470,000 b/d of outflows in 2015 when the US still had a crude export ban before the ban was lifted at the end of 2015.

Since the latest OPEC agreement was reached, the Middle East crude complex has moved steadily higher as the market priced in the prospect of cuts in term crude supplies from OPEC producers.

The premium of benchmark Dubai crude over WTI has widened in recent months.

Coupled with the inverted spread between WTI and Dubai have been relatively low freight rates further stimulating arbitrage economics. This in turn has led to Asian refiners looking even closer at buying US crude.

One interesting development with respect to logistics has been Occidental Petroleum recently docking a VLCC at The Occidental Ingleside Energy Center in Corpus Christi, Texas.

The VLCC Anne was chartered by Oxy and on Friday (May 26) this was received at Ingleside – making it the first US crude terminal to receive such a crude carrier, according to the Port of Corpus Christi.

This latest development at Ingleside also coincides with the first ever purchase of US Gulf Coast crude by Taiwanese refinery CPC Corp. The cargo of WTI Midland crude is expected to load around the end of June at Oxy’s Ingleside terminal.

Taiwan’s slate is predominantly Middle Eastern crude although CPC is believed to have previously imported some Alaskan North Slope crude a number of years ago. The latest purchase of US crude shows the increasing diversification of Asian refiners away from their traditional crude slates.

Many will now be asking who is the next Asian refiner to diversify its crude source and try US crude oil in its refinery

Until next time on the Snapshot—we’ll be keeping an eye on the market.