6 Million Barrels of North Sea Crude Oil Head to Asia

SINGAPORE (Dow Jones)–European trader Vitol has provisionally chartered a supertanker to ship North Sea Forties crude to Asia loading early January, in what could be at least the third such arbitrage voyage in just over a month, according to a shipbroker and traders.

Vitol provisionally booked the Very Large Crude Carrier (VLCC), Great Lady, to ship 270,000 metric tons, or around 2 million barrels, of Forties crude loading at Hound Point Terminal, Scotland, on Jan. 3. A Singapore-based trader said the cargo may be loaded a few days later.

Exports of more North Sea crude will likely firm the European market, somewhat offsetting the bearish impact of Petroplus Holdings AG (PPHN.PB) recently shutting down three refineries.

The latest fixture would mean that a total of 6 million barrels of Forties will have left the North Sea for Asia between in just over a month.

Differentials in the North Sea market jumped on Tuesday as Shell sold two Forties cargoes to Vitol, one at a premium of 80 cents a barrel to Dated Brent, compared with quotes at discount of 15-30 cents for mid-January loading cargoes in the previous session.

The latest booking highlights rising crude flow from the West to East after resumption of Libyan crude exports, as Asian refiners try to take advantage of a surplus European market.

Cargoes of Brent-linked Russian Urals were also seen chartered to head to Asia in recent weeks.

Another cargo of North Sea crude will likely be shipped to Asia late January. Statoil ASA (STL.OS) was heard to have provisionally chartered VLCC Front Champion at $6.10 million for Jan. 21-23 loading from Mongstad port in Norway for shipping 2 million barrels to South Korea.

The Singapore trader said it could be carrying some Norwegian grades, presumably for storage in Asia, although this couldn’t be confirmed. Statoil operates storage facilities in South Korea.

South Korea is also a likely destination for the Forties cargo. Two similar December parcels shipped by Total SA (FP.FR) and BP PLC (BP.LN) were heard to be targeting Korean refiners.

A free trade agreement between South Korea and Europe that came into effect in July allows buyers to redeem 3% of the price, making arbitrage deals attractive at current levels.

A senior executive with a Korean refiner told Dow Jones Newswires in mid-December that the company was weighing the option of buying January-loading Forties crude as the arbitrage window appeared open.

The FTA with Europe and a sharp increase in crude prices by Middle East producers last month made the arbitrage attractive amid a narrow Brent/Dubai EFS, he said.

-By Gurdeep Singh, Dow Jones Newswires