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Tanker Operators Look to U.S. to Replace Saudi Oil Cargoes

U.S. crude shipments are set to rise as major Asian importers look to replenish supplies after attacks on Saudi Arabia’s oil facilities took out a big chunk of global oil output.

“There are lots of inquiries for crude shipments out of the U.S. Gulf for Asian pickup,” said George Lazarides, head of research and valuations at Athens, Greece-based vessel brokerage Allied Shipbroking. “We expect that it will take at least three weeks for the disrupted Saudi output to get back online, and that’s pretty long.”

Drone and missile strikes at facilities in Saudi Arabia’s oil-rich eastern province knocked out roughly half of the country’s crude production, amounting to nearly 6% of global output. Tanker operators expect disruptions to run into October.

Prices to move crude cargoes are already rising, shipping executives said, as buyers seek oil from sources like the U.S. that will require longer trips to customers in Asia.

Brokers in Singapore and Europe say crude loadings at Ras Tanura, the major oil export port for the Saudi Arabian Oil Co.’s oil plant in Abqaiq that was struck by missiles on Saturday are largely idle for certain types of crude cargoes, with at least eight supertankers waiting outside the terminal.

Paris-based shipping tracking service Kpler said three product tankers that move refined products like gasoline, diesel and aviation fuel have been diverted from loading their cargo at neighboring Al Jubail, a global hub for chemical products, and six more were expected to be diverted in coming days.

“We are waiting for instructions from the client to pull out and load elsewhere,” said an executive of a Greek tanker operator that has a product tanker waiting at Ras Tanura. “Everyone is losing money waiting for loadings, so we’ll move on to pick up cargo from elsewhere.”

Ship owners said finding alternatives to pick up specific types of crude can be complicated as refineries are tailored to produce specific types of products.

“American refiners have the capacity to produce crude for Asian demand, so they will see more orders,” Mr. Lazarides said, adding that Russia, the United Arab Emirates and Kuwait can also supply the market.

Still, he said, “the Saudis are big players and it won’t be easy for Asian importers to find alternative sources.”

Brokers said that the U.S. and other energy producers can provide up to 1 million barrels a day of crude out of the roughly 5.7 million barrels that are currently offline in Saudi Arabia.

Owners and oil traders said tanker demand could be hurt if Asian importers such as China, India, South Korea and Japan choose to tap into their reserves, but they can’t rely on reserves for more than 10 days without supplies falling to critical levels.

Paris-based financial services provider Kepler Cheuvreux said the impact of the Saudi disruptions on tanker freight rates “is likely to be very positive” as tankers will have to travel longer distances from oil sourcing centers like the U.S to reach Asian clients.

Very large crude carrier, or VLCC, rates from the U.S. Gulf to the Far East rose to more than $37,000 a day this week, from around $28,000 on Friday before the attacks.

“People think this is just the start of more trouble and there is a real risk this will lead to a war with Iran,” said Ralph Leszczynski, an analyst at Italian ship-chartering firm Banchero Costa.

“Buyers will rush to secure cargoes fearing supply shortages in coming months. This would lead to more shipping volumes and higher tanker rates in the short term,” he said.
Source: Wall Street Journal

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