Record high US crude exports to Asia are cutting into traditional Russian and OPEC markets and the widening discount between Brent crude and WTI prices is encouraging buyers to diversify. Bloomberg News photo by Eddie Seal.
US crude exports expected to top 2.3 million b/d in June
Reuters reports that record US crude exports to Asia in the coming months will cut into Russia’s and OPEC’s market share in the highly-sought after, lucrative market.
In June, the US is expected to export 2.3 million barrels per day (b/d) and 1.3 million b/d will be shipped to Asia, a senior executive with key US oil exporters told Reuters.
Data from the US Energy Information Administration showed US crude exports hit record highs of 2.6 million b/d two weeks ago.
Record US production widened the discount between Brent crude and WTI to over $9/barrel on Monday. This is the widest discount in over three years.
The relatively lower prices have driven Asian refiners to reduce their imports from the Middle East and Russia after crude prices hit multi-year highs last week.
“We’re diversifying a lot to other regions. If Saudi Aramco still doesn’t reduce prices next month and ADNOC (Abu Dhabi National Oil Company) follows, we will increase our U.S. crude purchases,” a Southeast Asian oil buyer told Reuters.
Sinopec, Asia’s largest refiner, is the biggest lifter of US crude. According to Reuters’ sources, Sinopec cut the amount of crude it imports from Saudi Arabia and bought a record high 16 million barrels, or 533,000 b/d of US crude to load in June.
India and South Korea have also boosted their US crude imports, each lifting between 6 million to 7 million barrels next month, according to Reuters’ sources tracking US crude exports to Asia.
Indian Oil Corp bought 3 million barrels earlier in May and Reliance Industries recently purchased up to 8 million barrels, but it is unsure if Reliance’s cargoes would all be loaded in June.
South Korea’s top refiners SK Energy and GS Caltex drove sales of US crude.
And Taiwan’s state refiner CPC Corp bought 7 million barrels to be lifted in June and July.
US exports to Thailand will rise to at least 2 million barrels. Traders said the country’s state oil company PTT PCL bought 1 million barrels of WTI Midland and Thai Oil and Esso Thailand each bought at least 500,000 barrels of Bakken crude.
While sales of US crude are high, producers may hit a wall as strained infrastructure in the US could limit producers’ ability to pump and ship more crude.
“Tight (shale) oil’s been eating OPEC’s lunch for the last few years. The lack of infrastructure will temporarily cede market share back to OPEC,” Reuters reports R.T. Dukes, head of U.S. Lower 48 oil supply at Wood Mackenzie said in a note last week.