U.S. Oil Snares New Buyer as China Private Refiner Takes a Taste

  • Shandong Dongming said to buy April Southern Green Canyon oil
  • Cargo latest example of arbitrage shipments from west to east

U.S. oil that’s pumped in the Gulf of Mexico has found a new buyer in China.

Shandong Dongming Petrochemical Group, a Chinese independent refiner, has bought U.S. Southern Green Canyon crude for the first time ever, according to two traders who asked not to be identified because the information is confidential. The shipment, due to arrive in April, will follow another cargo of the same grade that will be received by a Japanese processor this month.

While supplies from American shale fields have made their way to Asia several times over the past year, the arrival of crude drilled off the southern U.S. coast is a more recent phenomenon spawned by output curbs in the Middle East. The lesser amount of crude leaving from the Persian Gulf has given the opportunity for similar types of oil from the Gulf of Mexico to sneak toward the biggest oil buyers in another corner of the world.

For a story on the threat faced by OPEC in Asia from rival supplies, click here

Crude pumped off the U.S. Gulf coast, such as Southern Green Canyon, are typically heavier and more sulfurous than those from shale fields, just as oil from the Middle East. The supply of such heavy-to-medium-sour grades has tightened as nations including Saudi Arabia keep to their promises of cutting output to comply with a deal among producers to drain a global glut.

Meanwhile the U.S., which is not part of the output agreement, has been ramping up output, weakening the cost of its crude versus rival supplies from the Middle East. For buyers in Asia, the world’s biggest oil market, this has meant American supplies have become so cheap that it justifies the cost of transporting them from all the way across the globe.

For a story on how OPEC’s cuts have cleared the way for U.S. oil to Asia, click here

Shandong Dongming is the biggest of China’s private refiners, known as teapots, which have boosted the nation’s crude imports after they were given approval to use foreign oil as part of the Chinese government’s efforts to liberalize its energy industry. It owns two refineries, one with processing capacity of 240,000 barrels a day in Heze and another of 60,000 barrels a day in Lianyungang, according to its website.

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