By March 7, 2016 Read More →

More US oil shipments destined for Europe despite record oversupply

North Sea crudes like Forties and Ekofisk became less cost-effective and dropped sharply due to strengthening dated Brent price

Europe

Congress late last year abolished the crude export ban and with the US oil inventories reaching all-time highs, exports to Europe and the Mediterranean have steadily increased.

Europe remains an attractive destination for US crude because of higher prices, and recent lower shipping costs make it an appealing export market for light sweet oil.

The US Gulf Coast is sending at least three crude oil cargoes across the Atlantic in the next few weeks, sources told Reuters.

According to the Energy Information Adminstration, the latest figures show crude oil stocks are at a record 518 million barrels. This is after one of the largest weekly build ups in the last year.

There is a favorable price difference because of supply disruptions, with a premium on benchmark Brent over WTI crude of around $3 a barrel, up from early Jan. when it was discounted 90 cents. The supply disruptions include a civil war in Nigeria, which is a European refinery staple, as well as disruptions to the Kurdish oil supply.

P66 and and Russia’s Litasco were among the companies lining up tankers to take US crude to Europe according to trade sources. The economics of shipping to Europe improved after a drop in freight rates that make shipping US crude much more attractive.

“We’re looking at what needs to come into northwest Europe instead of the Forcados cargoes from Nigeria. That may mix up the needs of northwest European or Mediterranean refiners which may be able to take some U.S. (crude) if it works,” another refiner told Reuters.

Europe

BP North Sea oil platform

The more plentiful North Sea crudes, like Forties and Ekofisk have become less cost-effective and dropped sharply. This is mainly due to a strengthening dated Brent price resulting in a drop for European gasoline refining margins.

According to Reuters data, there is a bigger incentive to try out other grades because running Forties or Ekofisk is at its least cost-effective in almost two years, traders said.

April or May is the expectation for the most recent round of US deliveries.

One problem facing many European refiners is that they don’t remember the last time they’ve run U.S. crude through their systems, and are therefore wary of doing so even if the numbers make economic sense on paper.

“We don’t know the crudes, so we need time,” another refiner told Reuters.

 

 

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