Asia’s affection for US crude not limited to low sulfur sweet grades
Asia has demonstrated its strong appetite for a wide variety of US crude grades since late 2018, with India’s recent purchase of Thunder Horse crude highlighting Asian refiners’ flexible crude procurement strategy of keeping the door wide open for both sweet and sour US grades.
Lighter and sweeter US crude grades including WTI Midland, Eagle Ford crude and condensate have been among the most popular grades typically sent to Asia, but a mixed bag of high sulfur US grades have started to regularly attract customers across Northeast and South Asia in recent quarters.
In South Asia, India’s Mangalore Refinery and Petrochemicals Ltd. recently bought via spot tender 1 million barrels of Thunder Horse crude from the US for delivery over October 11-20, company officials said Wednesday.
This latest North American spot crude cargo deal marked the Indian state-run refiner’s first ever purchase of the high sulfur US grade.
“We are open to buying more US [sour] grades at competitive prices in the near future,” a company official told S&P Global Platts Thursday.
In addition, Indian Oil Corp. currently holds a term supply contract to receive both light sweet US crudes, as well as medium sour Mars Blend grade, for 2019, Platts reported earlier, citing Asian trade sources with knowledge of the matter.
India’s flagship state-run refiner has put in place “a robust sourcing plan” to replace Iranian volumes after the US lifted sanction waivers on key customer of Iran’s oil, IOC Chairman Sanjiv Singh said in early May.
Singh confirmed at the time that the state-run company had secured deals to import an additional 4.6 million mt of US crude to help it replace just over half of its Iranian imports.
In Northeast Asia, Japan imported 1 million barrels of medium sour Southern Green Canyon crude from the US late last year and the country received 995,663 barrels of another medium sour Mars Blend crude in March, according to latest data from the Ministry of Economy, Trade and Industry.
South Korea’s crude imports from the US have already surpassed the 50 million-barrel mark for the year, with the country receiving 51.73 million barrels over January-May, more than a fivefold surge from 11.09 million barrels received in the same period a year earlier, latest data from state-run Korea National Oil Corporation showed.
Out of the 51.73 million barrels received so far this year, close to one fifth of the total intake consists of high sulfur US grades including Mars Blend, Southern Green Canyon and Poseidon, trading sources at SK Innovation, Hyundai Oilbank and GS Caltex said.
Light-medium sour offshore grade Thunder Horse has an average API gravity of 33.75 degrees and typical sulfur content of 0.73%.
Southern Green Canyon is a medium sour crude with an average API gravity of 28.2 degrees and typical sulfur content of 2.3%, according to crude assays from BP seen by Platts. Mars Blend is a medium density grade with gravity of API 29 and sulfur content of 1.8%.
US SOUR CRUDE DISCOUNT
MRPL’s maiden purchase of the Thunder Horse crude cargo may prove to be an economical feedstock procurement deal, as the high sulfur US grade is seen to be cheaper than many of the flagship Middle Eastern export grades, Asian trade sources said.
The outright price spread between Thunder Horse and Saudi Arab Medium crude official selling prices, with both grades calculated on a West Coast India delivered basis, averaged minus $1.26/b in June, minus $1.76/b in May and minus 97 cents/b in April.
Sources at Japanese integrated trading companies indicated that other US sour grades like Southern Green Canyon also appear to be highly economical options to replace Iranian Heavy crude, which Japanese refiners typically bought on a regular basis prior to the re-imposition of US sanctions on Tehran last November.
“Iranian Heavy is one of the cheapest medium/heavy sour oil in the world but it’s not accessible right now… US sour oil seems more competitive than many medium sour Middle Eastern grades though,” said a source at a Japanese oil and gas trading company.
The outright spread between Platts Southern Green Canyon crude assessments and Qatar’s medium sour Al-Shaheen crude, both on an India delivered basis, has consistently been hovering in negative territory, averaging minus 73 cents/b in June, minus $1.58/b in May and minus 56 cents/b in April, Platts data showed.