More and more West Texas crude heading Down Under
The US is quickly becoming a top supplier of crude for Australia, with the first full laden VLCC with WTI en route to Australia.
Like a microcosm of the overall US crude oil export growth phenomenon, Australian refineries are increasingly importing crude oil from the US, quickly making the it one of the main suppliers for the island continent.
Through July this year, Australia imported 75.55 million barrels of crude, with just 1.83 million of those barrels, or 2.4%, coming from the US.
But the latest Australian petroleum statistics from the Australian government’s Department of the Environment and Energy shows US crude inflows surged to account for almost 23% of total imports in August in September. In barrel terms, the country imported over 18.77 million barrels in August and September, with 4.26 million barrels of US crude.
Crude imports from Malaysia and the UAE, Australia’s two largest crude suppliers, fell in August and September compared with the first seven months of the year.
From January through July, monthly imports from Malaysia averaged 2.8 million barrels but fell to 2.01 million barrels in August and September. Similarly, imports from the UAE fell from 2.1 million barrels January through July to 1.23 million barrels in August and September.
First US-direct VLCC
The Pantariste, the first fully loaded VLCC carrying West Texas crude from the US directly to Australia, is en route, having left offshore Galveston, Texas, on October 28, according to data from cFlow, Platts’ trade flow software, with an estimated arrival December 10. Data from Kpler, a data intelligence company, shows the Pantariste to be carrying a full cargo of Midland-spec WTI crude.
S&P Global Platts fixtures data shows BP chartered the Pantariste in September for a lump sum of $5.15 million, with a loading period from October 14-18. Indeed, BP has chartered a slew of vessels in recent months to Australia, generally of the Suezmax class.
BP’s 146,000 b/d Kwinana Refinery southwest of Perth, Australia, is the likely destination for the Pantariste’s cargo, a sign the company is moving “equity barrels,” or barrels produced by a company and transported on ships or pipeline space it owns to its own refineries.
Kpler data has shown the Kwinana Refinery to be one the three main buyers of US crude in Australia, along with the 109,000 b/d Lytton Refinery owned by Caltex and the 120,000 b/d Geelong Refinery owned by Viva Energy.
“Historically, we have seen US crude reach Australia via ship-to-ship transfers off the coasts of Malaysia and Singapore,” said Emmanuel Belostrino, crude oil analyst at Kpler. “We’ve seen the first direct USGC-Australia voyage in April this year, with an Aframax carrying WTI Midland from Houston that unloaded at BP’s Kwinana refinery in July. Since then, at least one vessel a month has been departing from the US to deliver crude” to Kwinana.
From April through September, the Kwinana refinery imported around 34,300 b/d of US crude oil, according to Kpler data.
West Texas Down Under
Between January and October 2019, around 36,700 b/d of West Texas Intermediate crude were imported by Australian refineries, along with some partial cargoes of West Texas Light and other light sweet crudes, according to Kpler data.
In recent weeks, UAE Murban crude has traded at premiums between 40 cents/b and 50 cents/b over its January official selling price. Indeed, some traders expected Murban to trade over its January OSP because of seasonal demand and strong demand from Asia. These elevated levels for Middle East crude offer continued arbitrage opportunities for US crude.
According to S&P Global Platts Analytics Crude Arbflow Calculator, arbitrage for WTI from the Magellan East Houston terminal to Singapore versus Malaysia’s Tapis crude is shown to be open at a 24 cents/b incentive.
Murban crude has an API gravity around 40 and a sulfur content around 0.76%, Tapis crude has an API gravity around 42.7 and a sulfur content around .04%, while WTI crude has an API gravity around 40 and a sulfur content around 0.31%, according to an average of recent assays for the grades seen by Platts.