West African crude oil exports to Asia are on track to hit a five-month high of 1.96 million barrels per day (bpd) in December on robust buying interest in India, traders and shipping fixtures showed on Tuesday. Refiners on the subcontinent booked 24 cargoes, a 50 percent increase over the previous month, as they sought to meet surging fuels demand within the country. “Freight is edging up, and Brent/Dubai got so wide,” one trader said.
“But differentials just got low enough that they want to buy.” Some of the cargoes India booked for January arrival will be met with excess oil that loaded in November, meaning India’s voracious appetite for African crude is not totally reflected in the December bookings. Remarkably, the strong bookings still left more than 20 million barrels of West African crude seeking outlets.
Maintenance on Abu Dhabi’s Murban crude field scheduled for February has reduced the amount of oil available for term buyers in January and February, leading some to seek Atlantic Basin oil to fill the gap. But firm freight rates had been weighing on expectations for shipments east. Additionally, the spread between Brent and Dubai crudes DUB-EFS-1M widened to $3.12 per barrel this week, its widest in roughly 16 months.
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The wider the gap, the less competitive Brent-linked grades are to Asian buyers, and the more difficult it is to make money shipping Atlantic Basin oil to the East. But differentials versus dated Brent for Nigeria’s largest oil stream, Qua Iboe, are now at their lowest since April 2005. Other grades are similarly competitive; official selling prices dropped past a 10-year lows as the country sought to keep its oil competitive amidst a growing global glut. Chinese purchases of December-loading cargoes from Angola, Nigeria, the Congo and elsewhere also edged higher. The demand got a boost from so-called “teapot” refineries, which earlier this year received licences to import crude oil – and export oil products. Most are expected to ramp up purchases into 2016.
“The teapot demand is there, and they can book December cargoes for January arrival,” another trader said, adding that other buyers “might be filing up storage…a lot have floating storage in Singapore.”
COUNTRY DECEMBER BPD NOVEMBER BPD '000s
CARGOES '000s CARGOES
CHINA 30 919 29 918
INDIA 24 735 16 507
INDONESIA 2 61 4 127
TAIWAN 4 123 3 95
JAPAN 0 0 1 32
S. KOREA 1 19 0 0
OTHERS 3 92 2 63
TOTAL 64 1,961 55 1,742
