Higher West African crude premiums boosted by China's demand, have shut the arbitrage to Asia, with buyers now actively seeking Asia Pacific crudes to cover their October requirements, trading sources said this week.
Angolan cargoes for October have all been sold earlier than usual, the sources said. Premiums for other sweet Nigerian crudes have also risen due to increased demand, mainly from China, sources said.
The premium for Qua Iboe crude for loading in October, for instance, was assessed Thursday at $4.00-$4.05/barrel to Platts Dated Brent compared with $2.10-$2.20/b a month ago.
Chinese refiners' strong margins -- which are usually boosted by lower flat prices for crude -- and US refineries returning from turnarounds were the main reasons for the boost in West African crude demand, sources added.
In Asia, this has spilled over to impact premiums for sweet crudes in the region as the arbitrage for West African grades to Southeast Asia, especially, is closed, sources said.
Petronas was able to sell nine October loading cargoes earlier than usual on the back of the increase in demand, sources said.
"Looking at the participation level, it's been very aggressive," said an industry source on Asia-Pacific tenders.
Petronas Trading Corp., or Petco, for instance, sold 600,000 barrels of Tapis crude to an oil major for loading over October 1-30 at a premium of about $6.50/b to Dated Brent compared with $5/b to Dated Brent for September loading cargoes.
Australian crudes have also sold faster than usual, sources said, with premiums trading at higher levels.
Two October loading Stybarrow cargoes were sold at premiums above $6.90/b to Dated Brent to Chinaoil and Unipec, while Pyrenees for loading in October was sold to Chinaoil at about $3.40/b to Dated Brent, about 10 cents/b higher than September premiums.
With limited availability and high premiums of West African crude, the usual buyers of these grades in Asia are struggling to fulfill their tenders.
Indonesia's Petral bought only 600,000 barrels of Champion crude from Thailand's PTT for loading in October after a tender seeking sweet crudes drew high offers, sources said. The company usually buys West African Qua Iboe or Agbami in its sweet crude buy tenders.
India's Bharat Petroleum Corporation, or BPCL, has not awarded a sweet crude tender seeking up to 2 million barrels, also likely on high offers, traders said. The company had issued a tender last week seeking 500,000 barrels to 2 million barrels of sweet crude for loading over October 1-15. Part one of the tender had closed on August 22, and part two on August 23, and was valid until August 24.
"The margins in Northwest Europe have been very good, which has been driving the premiums [for West African crudes] up," a Singapore-based trader said.
