Shale boom tempts Saudis to consider US oil sale

singapore — Even Saudi Arabia wants in on the US oil boom.

The kingdom’s state oil firm considered the possibility of sending American crude to Asia in February via a US unit before determining it wasn’t economically viable, according to a person with knowledge of the matter. It also asked potential buyers in Asia if they would be interested in US supply, according to officials at two regional refiners.

The fact that the Saudis decided against moving a cargo to the world’s biggest oil consuming region this month doesn’t mean they won’t consider it again. Such a sale would be unprecedented, and a potential strategy by the Middle East nation in the face of rising US production. American supplies are proving a threat to efforts by the Opec producer and its allies to clear a global glut and prop up prices.

State-run Saudi Arabian Oil Company, known as Aramco, considered shipping the US crude to Asia via its Houston-based Motiva Enterprises unit, which operates North America’s largest refinery in Port Arthur, Texas, with a crude capacity of more than 600,000 barrels a day.

Relatively cheap US crude has increasingly been making its way to major consuming nations such as China, India and South Korea over the past year and eating into the market share of traditional suppliers like Saudi Arabia. While American oil is still a fledgling in Asia, Aramco is attempting to take advantage of the opportunities presented by the US shale boom that has transformed the flow of cargoes in the global market.

This week, the price of the benchmark US oil went above the Middle East marker Dubai for the first time in more than a year. This recent strength in WTI may have played a role in scuppering the potential shipment from the Gulf Coast.

“At current levels, the strength in WTI relative to Dubai prices doesn’t justify arbitrage flows of US crude into Asia,” said Nevyn Nah, an analyst at industry consultant Energy Aspects.

The Suezmax tanker AST Sunshine, provisionally sought to transport crude from the US to Asia, failed to be finalised for the journey. The vessel was meant to transport 130,000 metric tonnes of crude loading in late February from the US Gulf Coast, bound for Singapore and Ningbo in China. — Bloomberg