Bloomberg News

Forties Crude Drawn to Mediterranean as Russian Oil Prices Gain

June 27, 2013

A cargo of North Sea Forties crude is on its way to Spain, at least the second vessel to make the voyage this month, as strengthening Russian prices encourage a wider range of buyers for the U.K. grade.

Repsol SA (REP) loaded a Forties cargo on the SC Sara on June 22, according to ship-tracking data compiled by Bloomberg. Another Forties consignment was loaded onto the vessel Torm Ingeborg yesterday at Hound Point, Scotland, according to ship-tracking data from ShipAIS. Both vessels are heading for Tarragona, where Repsol operates an 186,000 barrel-a-day refinery. Total SA (FP) booked a ship to collect a cargo at the Forties terminal and ship it to Poland, shipbroker data show.

A narrowing spread between prices for Forties and a Russian alternative crude, Urals, has made these arbitrage trades possible, said three people familiar with the matter who asked not to be identified because the information is confidential. Spain hasn’t imported crude from the U.K. since September 2011, according to state-run reserves agency Corporacion de Reservas Estrategicas de Productos Petroliferos, or Cores. The data extend through April 2013.

Forties crude cargoes are finding homes in European destinations as changes to South Korea’s tax regime has curtailed the flow of North Sea crude to the Asian nation. South Korea and the European Union signed a free-trade agreement in July 2011, which exempted its refiners from a 3 percent tax on EU imports. The agreement triggered an arbitrage flow of North Sea crude to the Asian country, before slowing since March when the South Korean government closed a loophole that allowed its refiners to claim rebates on oil product exports derived from North Sea crude.

Poland Voyage

Poland is among other destinations where the North Sea grade, one of four that make up the Dated Brent benchmark, is being sold to. The Russian grade, Urals, cost 17 cents a barrel more than Dated Brent in northwest Europe yesterday, up from a discount of $2.90 on March 1, data compiled by Bloomberg show. Forties was at a 5-cent premium to dated Brent yesterday, versus a 12-cent premium on March 1.

Chartering and Shipping Services SA, a shipping unit of Total, booked the British Falcon for July 4 from the Forties loading terminal Hound Point for a voyage to Gdansk, according to reports from ship brokers, including JGO Shipbrokers AS. Brian O’Neill, a spokesman for Total in Aberdeen wasn’t available for comment yesterday, and officials at Total’s press office in Paris didn’t return an e-mail seeking comment.

To contact the reporter on this story: Laura Hurst in London at lhurst3@bloomberg.net

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


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