SOCAR takes advantage of gap in OPEC deal

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23 February 2017

Around 30 supertankers have this month made long-haul trips to ship crude oil from the Americas, the North Sea and the Mediterranean to refineries across Asia, the world's biggest and fastest growing consumer.

 

The unusual movements follow the decision late last year by the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia to cut production by almost 1.8 million barrels per day (bpd) during the first half of this year in a bid to rein in global oversupply and prop up prices.

 

Companies most involved in the long-haul deals include major oil producers such as BP and Royal Dutch Shell, private commodity traders Trafigura, Vitol and Mercuria, and Chinese refiner Unipec, trading sources say. Energy and mining giant Glencore, Azerbaijan's state-oil firm Socar and Brazil's Petrobras have also been involved.

 

Taking advantage of relatively low freight costs and regional crude oil price differentials - known as arbitrage, or arb - traders can profit from supply shortages in one region and oversupply in another.

 

West Texas Intermediate (WTI) crude futures CLc1, for example, currently trade at around $54.50 per barrel, while international benchmark Brent crude LCOc1 costs $56.90 - a Brent premium over WTI of $2.40 a barrel, compared with near parity in late November, just before OPEC announced its cuts.

 

Loading schedules show U.S. crude exports to Asia increased to more than 3.5 million barrels this month - including a first U.S. oil cargo delivery to India - from below 1 million in October. UK shipments have jumped to more than 10.5 million barrels from just 1.6 million.

 

Shipments to Asia from Brazil have hit a record 16.7 million barrels in February, up from 6.9 million in October, and Libya, an OPEC-member exempted from the cuts, doubled its Asia shipments to 2 million barrels last month.


Shipping schedules show the trend continuing into March.

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