Oil Traders to Store West African Crude in U.S. Until Prices Recover

By David Sheppard and Jonathan Saul

LONDON, Jan 15 (Reuters) – Traders are delivery West African crude to the United States to retailer the oil till costs get well, as the worldwide glut forces them to supply any tanks accessible and as seaborne cargoes are in a position to compete higher on value with U.S. crude.

Oil corporations together with Swiss-based Glencore, Italian power main ENI and Canadian’s largest oil firm Suncor have all lined up ships to take at the least 10 million barrels of West African crude to North America, ship brokers say, with freight bookings and tanker monitoring additionally displaying the strikes.

The transfer reinvigorates a commerce that had been largely shut off by the U.S. shale increase, as West African barrels that was imported to the United States have been a few of the first to be pushed out by hovering output in Texas and North Dakota.

While U.S. oil inventories are already close to the best ever degree for this time of 12 months, the United States has much more spare storage tank capability accessible than Europe or Asia.

Refiners within the United States and Canada are additionally on the lookout for cheaper barrels as U.S. benchmark West Texas Intermediate has roughly hit parity with worldwide marker North Sea Brent after having traded at a reduction to seaborne cargoes for over 4 years.

“There is so much storage capacity in the United States and so little in northern Europe that apparently the differential between Brent and WTI has gone,” mentioned Anthony Gurnee, chief govt of Ardmore Shipping Corp, which owns and operates a fleet of oil product tankers.

With spot oil costs down virtually 60 p.c since June to under $50 a barrel, and future contracts for supply subsequent 12 months buying and selling far greater, the motivation to retailer crude has risen.

While merchants have already booked tankers to retailer at the least 25 million barrels of oil at sea this week, land-based storage could also be a extra economical choice for many who can discover it.

According to business sources and freight bookings seen by Reuters, at the least 10 tankers are set to hold a complete of 10 million barrels from West Africa to the United States, with some going to the U.S. Gulf Coast the place a lot of the nation’s storage tank capability lies.

The 1 million barrel Almi Galaxy suezmax tanker is proven in AIS tanker monitoring on Reuters as crusing to the Louisiana Offshore Oil Terminal (LOOP), having been chartered by ENI to elevate crude from the Cameroon port of Kribi.

“They’re forcing all the crude on us,” one U.S.-based dealer mentioned. “We have a lot of stock, but this (the Gulf Coast) is also the only place to push it.”

Glencore’s delivery arm ST Shipping has chartered 2 suezmax tankers able to carrying 1 million barrels every, the Genmar Kara G and SKS Spey. Vitol, the world’s largest unbiased oil dealer, and refiner Tesoro are additionally taking tankers to the U.S. Gulf.

REFINE OR STORE

Others are going to refineries on the East Coast, which usually course of lighter, sweeter crude than their counterparts within the Gulf. Some could also be used as alternate options to shale oil from North Dakota, which must be railed in on costly trains.

Suncor has loaded two 1 million barrel cargoes from Nigeria this week, the Max Jacob and Amoureux, in line with Reuters delivery information and knowledge supplied by brokers. In October the corporate unloaded some North Sea cargoes in Portland, Maine, earlier than delivery them north to its refineries in Canada by pipeline.

There can also be at the least one cargo of oil from Azerbaijan, the 1 million barrel Nordic Freedom, listed as going to Portland Maine. It exited the Mediterranean in the beginning of this week.

Prior to the peak of the U.S. shale increase, West African producers like Nigeria and Angola had been massive suppliers, sending a complete of virtually 1 million barrels per day to the United States between 2010 and 2012.

But given that the majority crude from West Africa is of an analogous high quality to the sunshine candy crude produced within the U.S. shale increase, imports from Nigeria and Angola rapidly collapsed, falling to a mean of a bit of over 320,000 bpd final 12 months, information from the U.S. Energy Information Administration reveals.

The international oil glut has hit West African cargoes significantly exhausting, as they attempt to discover new properties in Asia and Europe. Price differentials for Nigeria’s largest export grade, Qua Iboe, fell to the bottom since 2005 this month. (Additional reporting by Libby George in London and Catherine Ngai and Robert Gibbons in New York; Editing by Christian Plumb)