Asia Flooded With West African Oil in Latest Sign of OPEC Impact

  • West African exports to Asia at highest since at least 2011
  • OPEC-led cuts have made Middle Eastern grades more expensive

West African oil producers this month will send the most crude to Asia in at least five years, the latest sign of how refineries in the world’s biggest demand region are scouring the world to replace supplies cut by OPEC’s Middle East producers.

Shipments on the trade route, among the longest for supertankers, are set to soar to 2.19 million barrels a day in February, the highest level since at least August 2011, according to data compiled by Bloomberg from traders. China and India will be the biggest buyers. In recent weeks, a similar picture emerged from both the North Sea, where unprecedented eastbound flows have been observed, and also the U.S.

“Production cuts have led to the shortage of Middle Eastern oil in Asia,” said Ehsan Ul-Haq, principal consultant at KBC Advanced Technologies. “As a result, regional refiners have been forced to buy crude from the West.”

Since the beginning of the year, the Organization of Petroleum Exporting Countries and 11 other nations have curbed supplies in an effort to prop up the price of oil, which has lost about half its value since mid-2014 due to a global oversupply. Of the OPEC nations that participated in cuts, about four-fifths of supply came from the group’s Middle East members. The effect has been a re-drawing of oil-trade routes because Asia’s crude consumption accounts for about one-third of the global total, exceeding that of any other region.

Oil from the Middle East has become relatively expensive as supplies have been cut. West Texas Intermediate crude, the U.S. benchmark, is now trading at a discount to the Dubai grade, compared with a $1.45 premium on Dec. 1, the day after OPEC announced its output curbs. The comparable premium for Brent crude has shrunk by about $1 a barrel during the same period.

Shipments Surge

The 2.19 million barrels a day that West African nations, led by by Nigeria and Angola, will send to Asia in February compares with about 1.79 million barrels a day in January, the data compiled by Bloomberg show. This month’s figures may still increase, since Trafigura Group and Vitol Group still hold cargoes totaling 3.74 million barrels, which are likely to be shipped to Asia, according to three traders with knowledge of the matter.

China’s monthly crude imports from across the globe surged to a record 36.4 million tons, or 8.6 million barrels a day, in December, the latest customs data show. Oil refining in the country also rose to a record that month, and a blast of cold weather in recent weeks has boosted fuel demand in North Asia.

China is set to import 1.3 million barrels a day in crude oil from West Africa in February, a 14 percent increase from January, the data show. Buyers include Sinochem Group, PetroChina Co. and Unipec, the trading arm of China Petroleum & Chemical Corp.

India’s monthly imports from West Africa are poised to increase by 39 percent, to about 692,000 barrels a day, the most since August, loading programs show. Crude imports in India, the world’s fastest-growing oil market, rose by 10 percent to about 18 million tons a month last year, according to data from the nation’s Ministry of Petroleum & Natural Gas.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE