Flood of US oil to Asia comforts tanker market trashed by Opec
london — Opec all but trashed the tanker market with its output cuts. That the damage hasn’t been even worse is thanks in large part to a flood of US crude exports, particularly to Asia.
China zoomed past Canada to become the biggest foreign destination for American crude in February, accounting for more than eight million barrels of US cargoes. Tanker tracking is indicating no let up in US oil flooding to Asia in March, boosting shipments on what is one of the industry’s longest-distance trade routes.
Freight rates for oil collapsed this year after the Organisation of Petroleum Exporting Countries and other nations reliant on crude sales announced production cuts in a bid to prop up prices. The curbs have driven Chinese and other Asian buyers to places like the US and the North Sea to source crude like never before, adding the vital ingredient of distance to tanker demand.
“The US exports have been a big saving grace,” said Jonathan Lee, chief executive officer of Tankers International LLC in London, operator of the world’s biggest pool of supertankers, known in the industry as very large crude carriers. “Is America becoming a swing producer of pricing and quantities? For us there could be an argument to say yes.”
The US exported 8.08 million barrels of US light crude to China in February, nearly quadrupling its January flows, according to data released by the US Census Bureau. That helped boost total monthly US exports to a record 31.2 million barrels.
Tanker tracking data show a continuation of the trend. Supertankers with the capacity to move four million barrels are en route to Chinese ports. A further seven million barrels are being shipped to Singapore, a refuelling point for vessels ultimately sailing to China. All the ships in question are sailing east, rather than around South America and across the Pacific Ocean. The data include deliveries on one million-barrel hauling vessels called Suezmaxes, which Lee says are also benefiting from the surging US outflow.
Even so, the shipments from the US and elsewhere in the Atlantic Basin only mean rates are less bad than would they would have been otherwise.
Opec, along with its non-member allies, pledged to cut about 330 million barrels from the global oil market in the first six months of this year. With about 40 per cent of global crude output getting moved by sea, that would imply the removal of about 130 million barrels from the supertanker market. There’s also speculation that the cuts, initially planned to run for six months from January, may be extended through December.
“If you look at total crude exports, it’s down,” said Frode Moerkedal, an analyst at Clarksons Platou Securities, the investment banking unit of the world’s largest ship broker. — Bloomberg