Added Oct 31, 2018

Analysis: Med crude flows to China rise

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Crude shipments to China from the Mediterranean and Black Sea region rose sharply in the past two months, Vortexa data show, reflecting a more economically viable eastbound arbitrage.

October-loaded exports to China from the region stood around 420,000 b/d on a preliminary basis and included grades that less regularly travel there, such as light sweet Azeri BTC Blend and light sour Caspian CPC Blend.

October rates held firm from the multi-year high level of around 450,000 b/d observed in September, contrasting in turn with a flow of 175,000 b/d seen in the first eight months of the year.

The slate of regional grades travelling to China was also more diversified in September-October compared with prior months. Previously these flows were dominated by Libyan material, with smaller volumes of Russian medium sour Urals from Russia’s Black Sea port of Novorossiysk and Algerian light sweet Saharan Blend. Exports from Egypt were not included in the regional total.

Healthy European and Mediterranean supplies, as well as a pick up in Chinese demand gave impetus for the barrels to move out of the area. At the same time exports to China from another light crude source —the US—dropped sharply in August-September amid trade war tensions, following firm loadings in June-July.

Besides the tankers currently moving to China, there are still several others heading to, or towards Singapore as a next destination, with the possibility that some of these may continue their journey further eastwards and lift October exports to China yet higher.

October exports diversify

Recent exports were boosted by the departure of a 2mn bl cargo of Azeri BTC Blend aboard VLCC Arion, which loaded on 9 October from the Turkish port of Ceyhan. The tanker is declaring its destination as Yangpu, whose intake is composed of largely light-sour and light-sweet grades. The vessel could arrive there around end-November.

Another BTC Blend cargo subsequently loaded from Ceyhan at the end of October, onto a tanker booked for delivery to Ningbo. The grade was last seen travelling to China mid-last year, even though it more regularly heads elsewhere in Far East.

A Suezmax-sized cargo of CPC Blend was also exported to China in October, after another such tanker made the rare journey from Novorossiysk in September. That tanker performed ship-to-ship (STS) transfers in the Malaysia region onto two Aframax vessels that continued their journeys to ports in China.

CPC Blend is more regularly picked up by refiners elsewhere in the region, particularly South Korea. The latter country significantly upped its intake of the grade during the second and third quarter of this year, as the looming return of US-led sanctions on Iranian exports likely encouraged its search for alternative supply. CPC Blend availability has also risen this year with a growth in production.  

There is said to be continued interest in sending cargoes of CPC Blend to China in November, potentially 1-2mn bl, according to market participants.

Libyan exports are expected to remain healthy in November, with several cargoes already seen booked to load for China.

Libyan shipments to China in the first nine months of the year were seen at 145,000 b/d, rising particularly in the past two months, along with a recovery in the country’s output. Exports along the route held broadly steady month-on-month at around the 200,000 b/d mark in October, with loadings emerging from Es Sider, Marsa al-Hariga, Zueitina and Ras Lanuf ports during the month.

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