Flotilla of U.S. Crude Heads to Asia as OPEC Weighs Extending Cuts
HOUSTON/NEW YORK, May 17 (Reuters) - Oil tankers carrying around 10 million barrels of U.S. crude are en route to Asia, according to shipping data and trade sources, as U.S. producers take advantage of favorable prices to ship to the region while OPEC ponders further supply cuts next week.
At least eight tankers are in transit, sources said and the shipping data in Thomson Reuters Eikon showed, with one of them carrying the first ever cargo of Southern Green Canyon crude purchased by Japanese refiner Cosmo Energy. Another contains the first Alaskan North Slope cargo to arrive in Asia in eight months.
OPEC members meet next week to discuss extending a global supply cut, but the possibility of U.S. supply eating into their market share will be a challenge. While member countries have largely restrained their supply, they have remained intensely focused on keeping market share with Asian refiners. But relatively cheap U.S. crude has buoyed exports to Asia.
Traders expect that May U.S. crude exports could reach around 1 million barrels per day, with a sizable portion of that going to Asia. Last week, U.S. crude exports touched 1.09 million bpd, the third highest on record, according to U.S. government data. If numbers remain elevated, they could surpass the record 1.2 million bpd seen in February.
"We expect that momentum to continue when (Dakota Access Pipeline) opens and as more Permian production hits Corpus Christi docks," said Sandy Fielden, director of oil and products research at Morningstar, of the exports.
U.S. oil production has risen by 10 percent to 9.3 million bpd since mid-2016, according to the Energy Information Administration.
Increasing traffic to Asia is possible because of a widening premium for Brent over U.S. crude, which touched a six-week high on Wednesday <WTCLc1-LCOc1>.
"Early May spot prices showed both Brent and Dubai trading at around a $3 per barrel premium to Brent and WTI Cushing, which is an open window," said Fielden.
Meanwhile, prompt Brent crude's premium to Dubai, also called the exchange of futures for swap <DUB-EFS-1M>, narrowed to below $1 a barrel last month, hitting 46 cents a barrel on April 27, its tightest since 2010.
That spread has been tightening since OPEC agreed to production cuts in November, making U.S. cargoes more competitive. An extension to OPEC cuts may further benefit U.S. producers and exporters.
The Sydney Spirit, a Bahamas-flagged Suezmax tanker chartered by P66, is delivering Alaskan North Slope (ANS) crude to Asia, according to two sources and Reuters vessel tracking data. Half of the crude onboard the vessel is unsold, one of the sources said.
Vessel tracking data available via the Eikon system lists the ship as "for orders," which indicates there may not be a buyer for at least some of the crude. The ship is currently on its way to Asia.
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