Oil traders rush to secure vessels as U.S.-Europe export arb opens

tanker-golden-gate-bridge

A rare opening of an export window for crude moving from the U.S. Gulf to Western Europe has caused a flurry of interest among oil traders, with at least two securing vessels.

On Tuesday, global marker Brent’s premium traded to as much as $2.50 a barrel over U.S. crude futures, the most since late February.

The widening of the premium presented an arbitrage opportunity, prompting oil traders to secure vessels to send crude eastward across the Atlantic, sources said. The shipments are shaping up to be one of the more notable batches of U.S. crude exports bound for Europe since a ban on them was lifted in December 2015.

Astra Transcor Energy, also known as Astra Oil, has secured the Nantucket, a Suezmax, loading heavy Canadian crude in Houston on Aug. 30 to the United Kingdom or Mediterranean, according to two sources familiar with the matter and Thomson Reuters shipping data.

For its part, Vitol has secured the Scf Baikal, a Suezmax, loading on Aug. 20 in the U.S. Gulf to the same destinations, according to a third source and vessel tracking data. The type of crude was not immediately clear.

A representative for Astra could not immediately be reached for comment, while a Vitol spokeswoman declined to comment.

Those moves come as freight rates have fallen dramatically in recent weeks, facilitating the economics of moving oil abroad.

Both tankers were booked around just 30 percent of the World Scale shipping rate, according to Thomson Reuters fixtures data. Just a month ago, vessels booked for a similar route were fixed at around 55 to 60 percent of the World Scale rate, which at the time was considered very competitive.

The export of heavy crude pushed Mars Sour, the U.S. Gulf Coast medium sour benchmark, to a five-month high earlier this week, despite a rash of refinery upsets. Traders cited the need for additional sour barrels for blending.

In fact, the premium for Mars Sour over Colombian Castilla crude, a heavy barrel, narrowed to its tightest in four months this week, according to Reuters data. Western Canadian Select traded at about $2.50 a barrel below Castilla on Wednesday, traders said, making North American heavy crude more competitive.

Traders said that Castilla could act as a spot barrel substitute for heavy Canadian depending on price.

Exports of U.S. crude are slated to pick up in coming weeks, as outages in West Africa props up demand, according to consultancy Energy Aspects.

They said in a note that more than 10 million barrels oil were rumored to be “leaving the U.S. over the course of the next month or so – most of which is pointed towards the Med and Northwest Europe.”

[reuters]

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