Demand for US crude surges after attack on Saudi facilities

Crude oil storage tanks are seen from above at the Cushing oil hub, Oklahoma in this March 24, 2016 file photo — File pic
Crude oil storage tanks are seen from above at the Cushing oil hub, Oklahoma in this March 24, 2016 file photo — File pic

NEW YORK, Sept 17 — US crude export demand at the Gulf Coast surged yesterday, traders said, as the window to export crude profitably to Asia and Europe was thrown open after attacks on Saudi Arabia's oil facilities took out 5 per cent of global oil supplies.

The attack knocked out more than half of Saudi Arabia's oil production and damaged the world's biggest crude processing plant.

The attacks sparked the biggest jump in oil prices in almost 30 years, with Brent crude futures outpacing gains in US crude futures. Brent's premium over US crude widened to as much as US$7.40 (RM30.83) a barrel yesterday, making US crude-linked grades more attractive to buyers in Asia and Europe.

The United States now exports more than three million barrels per day (bpd), with some analysts estimating it may reach more than four million bpd in response to the attacks.

“You'll see the US benefit from this in taking up some of the slack in light crudes,” said Joe McMonigle, energy analyst at Hedgeye Research. “I don't think there really is enough to offset what is going to be offline here for a period of time, and you don't even know the quantity of time."

Shipping rates for supertankers — the biggest vessels in the global oil fleet — to ship crude from the US Gulf Coast to Singapore surged yesterday.

Very large Crude Carrier (VLCC) rates from the US Gulf Coast to Singapore were last seen at nearly US$7 million yesterday, up significantly from about US$5.5-6 million on Friday, one shipbroker said.

Freight rates to transport Aframax-class oil tankers carrying 700,000 barrels from the US Gulf Coast to Europe rose from US$20.26 to US$22.10 per metric ton, "and are still have upward momentum," a US shipbroker said. "We have been working on a handful of eastbound cargoes" yesterday.

Last month, buyers in China — Saudi Arabia's biggest oil consumer — snapped up US crude ahead of a 5 per cent tariff, with imports rising to 505,000 bpd, the highest since June 2018, according to market intelligence firm Kpler.

An anticipated decline in availability of Arab Light crude, a medium sour grade, has spurred demand for Mars Sour crude, the benchmark US coastal sour grade, traders said. Mars traded US$3.25 over US crude yesterday, up from US$1.05 on Friday and the strongest in more than a month. — Reuters

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