The arbitrage window for American crude shipments to Asia could soon close amid surging tanker rates and cheaper Middle Eastern oil which is also closer to the world’s top demand region than the U.S. Gulf Coast.
The rates for chartering a supertanker, the so-called very large crude carrier (VLCC) capable of transporting up to 2 million barrels of oil, from the U.S. Gulf Coast to Asia has jumped to $70,000 per day in recent weeks, according to data from the Baltic Exchange cited by Bloomberg.
The rates for supertankers on the Middle East to China route are steeper, at about $90,000 per day and even $100,000 in some recent deals, but the voyage from the Middle East to Asia is about two weeks shorter compared to the U.S-Asia route.
So the cost of shipping U.S. crude could soon become uneconomical and close the arbitrage window, according to analysts.
“With OPEC unwinding their quotas, we are seeing more cargoes in the East of the Suez,” Ed Finley-Richardson, shipping analyst and founder of Contango Research, told Bloomberg.
Tanker owners “are optimistic about their prospects there, and so prefer to remain in the East,” Finley-Richardson said.
The higher shipping costs have already started to narrow the U.S.-Asia arbitrage, potentially removing soon a major long-haul tanker route, at least for a few weeks.
The arbitrage window for U.S. crude sold in Asia is shrinking amid higher tanker rates and rising WTI premiums. The additional cost for carrying crude from the U.S. Gulf Coast to Asia has now reached $1.75 per barrel, a trade source told Reuters this week.
“That alone would close the arb,” the source said.
At the same time, the Middle Eastern benchmarks Dubai and Oman, and the price of Murban have seen their premiums over Brent Crude narrowing, making the Middle Eastern shipments cheaper. The premium of Murban over Brent futures, for example, has slumped from as high as $3.84 per barrel on September 12 to $1.63 a barrel on September 26, according to exchange data compiled by Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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