Bloomberg News

Asia Cuts July Imports West Africa Crude to 10-Month Low

June 26, 2012

Asian refiners will reduce imports of West African crude in July to the lowest level in 10 months as China and India cut purchases, a survey of seven traders and an analysis of loading plans obtained by Bloomberg News showed.

Refiners in Asia bought 46 cargoes from Angola, Nigeria, Republic of Congo, Equatorial Guinea, Democratic Republic of Congo and Gabon, according to the survey. That totals 42.05 million barrels, or 1.36 million barrels a day, the least since September and 25 percent less than June.

Buyers in Asia can opt between Middle Eastern crude or Atlantic Basin grades, and their choice normally depend on the value of the lighter, sweet blends from the North Sea and West Africa versus heavier, sour grades from Saudi Arabia and Iran. Lighter crude yields more lucrative products such as diesel and gasoline. Sweet grades contain less sulfur than sour.

A slowdown in economic growth among buyers such as China and India has sapped oil demand, while cheaper alternative grades also prompted refiners to cut back on their intake of West African crude.

Chinese refiners are cutting their runs, while in India, “gross domestic product forecast have been revised down with Indian rupees plunging to the lowest level in more than nine months, which has been mitigating the impact of lower crude prices on fuel prices,” Ehsan Ul- Haq, a senior market analyst with KBC Energy Economics in Walton-on-Thames, England, said in an e-mailed response to questions on June 22.

Cheaper Mediterranean Grades

“Caspian and North African barrels have been cheaper than West African crudes in recent weeks, prompting Asian refiners to buy Algerian, Azeri and Libyan crude instead of Angolan and Nigerian grades,” he said, adding that Asian refiners have stockpiled “too much” oil ahead of the implementation of sanctions against Iran by the European Union on July 1.

Nigerian benchmark Qua Iboe fell to a premium of $1.35 a barrel to Dated Brent today, the lowest since May 1, according to data compiled by Bloomberg.

The U.S., the biggest buyer of Nigerian crude, has cut its purchases since September. Its imports from Africa’s largest producer fell to 337,000 barrels a day in March, the least since December 1996, compared with 840,000 a year earlier, according to data from the Department of Energy.

Chinese refiners cut their imports to 27 cargoes, the least in 10 months, compared with 29 for June, the survey showed. China International United Petroleum & Chemical Corp., known as Unipec, bought 17 shipments, down from 21 for this month.

Chinese Demand

China Petroleum & Chemical Corp. (600028), the nation’s biggest refiner, reduced crude processing for this month by 8 percent from its original plan, according to C1 Energy. The cut in processing rate came after China’s stockpiles of crude for commercial use rose to the highest level in eight months in May.

Supplies of crude, excluding emergency reserves, climbed 0.2 percent at the end of May from a month earlier, China Oil, Gas & Petrochemicals newsletter compiled by Xinhua News agency showed June 20. That takes crude inventories to 29.88 million metric tons, or 219 million barrels, the most since September, according to calculations by Bloomberg News based on the data.

India cut imports of West African crude to a seven-month low of 12 cargoes, six less than this month, the survey showed. The country’s imports of Nigerian crude will drop to five shipments from 12 in June.

Indian Oil

Indian Oil Corp., the nation’s largest refiner, bought six shipments, the least since September, while Reliance Industries Ltd. (RIL), which owns the world’s largest refining complex, reduced its imports to three cargoes from five, the survey showed.

Bharat Petroleum Corp., India’s second-largest state refiner, bought two cargoes, down from five in June, which was the most in at least 11 months.

Taiwan’s state-owned CPC Corp. purchased six shipments of Angolan crude, one more than this month, the survey showed.

Indonesia’s state-owned PT Pertamina didn’t buy any West African crude for July, the first time in at least one year, according to the survey.

The Brent-Dubai exchange for swaps, which measures the European benchmark against the Persian Gulf grade, averaged $3.57 in May, compared with $3.77 in April and $3.84 in March, according to data from PVM Oil Associates Ltd. The spread fell to a 22-month low of $1.38 a barrel on June 21. Traders make more profit from shipping crudes from Europe or West Africa to Asia when the spread between the two contracts shrinks.

Refiners opted for cheaper crudes from the Mediterranean, which are also priced against Dated Brent, instead of West African grades for loading in July.

Nigeria will export 2.18 million barrels a day of crude next month while Angola will ship 1.58 million barrels, Bloomberg calculations based on loading programs showed.

The following tables show details of planned Asian imports. Most cargoes are for 950,000 to 1 million barrels. All the volumes are in barrels a day.

---------------------------------------------------------------
Countries   Number of Cargoes     Total Volume
            July      June        July        June
China       27        29          800,645     922,677
India       12        18          352,419     566,667
Taiwan       6         5          183,871     158,333
Indonesia    0         3                0      95,000
Japan        1         1           19,355      26,667
Thailand     0         1                0      31,667
---------------------------------------------------------------

Month            Cargoes   Total       Angola        Nigeria
2012
July               46      1,356,290     986,774     179,839
June               57      1,801,000   1,020,667     513,333
May                59      1,810,613   1,147,581     370,774
April              60      1,878,167   1,214,167     424,000
March              61      1,837,258   1,081,452     401,613
February           66      2,151,034   1,357,586     496,552
January            61      1,826,935   1,056,613     461,290

2011
December           47      1,433,387     993,710     279,032
November           49      1,554,500   1,028,500     285,000
October            49      1,507,742     962,581     308,065
September          42      1,344,333     930,167     287,500
August             50      1,536,613     931,774     387,097
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To contact the reporter on this story: Sherry Su in London at lsu23@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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