After OPEC cuts heavy oil, China teapot refiners pull U.S. supply to Asia
http://www.reuters.com/article/us-china-oil-usa-idUSKBN15Z0RSFeb 20, 2017
Chinese independent, or teapot, refiners are bringing in rare cargoes of North American heavy crude in a new long-distance flow that traders say has only been made possible by OPEC's output cuts and ample supplies in Canada and the United States.
In April, at least 1 million barrels of the heavy crude Mars, pumped from the U.S. Gulf of Mexico, are expected to land in China's Shandong province and 1 million barrels of a second unidentified heavy grade will arrive in China, trade and shipping sources said last week. This follows the arrival in January of 600,000 barrels of U.S. Gulf Blend, a heavy crude made up of a blend of various U.S. and Canadian grades loaded onto ships on the U.S. Gulf Coast, according to the sources and shipping data.
Heavy crude is typically more dense and viscous than other oil grades. Refiners with facilities that can process these grades value heavy crude because its lower cost results in higher margins from producing fuels from these grades.
The Organization of the Petroleum Exporting Countries' (OPEC) output cuts have targeted heavy crude, with linchpin producer Saudi Arabia and Venezuela reducing their exports of heavy crude. That has increased the price of Middle East heavy crudes for Asian delivery, making it economical for traders to ship crude from Russia, the Atlantic Basin and the United States to Asia.
"The OPEC cuts started from medium and heavy grades and Venezuela (a key supplier to China) is exporting less," said a Singapore-based crude oil trader.
The tightening heavy crude supplies are occurring at a time when demand for these types has increased after refiners upgraded their plants, the trader said. Heavy crude typically yields a higher percentage of residue fuels when first processed at a refinery and that residue is then reformulated into higher-value fuels such as gasoline and diesel fuel in so-called cracking units.
Since late last year, China, the world's second-largest oil consumer, has stepped up imports from North America, one of the few regions where oil production is growing....
