Asia buys more Mideast heavy crude as Latam supplies fall

* Latam exports to Asia down 1 pct in Q1; Mideast up 7 pct

* India imports from Latam fall 13 percent in Q1

* Supply outages, strong WTI prices curb Latam exports to

* Buyers look to Mideast for more heavy crude supplies

By Florence Tan

SINGAPORE, April 6 Asian oil buyers are seeking
more heavy crude from the Middle East this year as Latin
American supplies have become more expensive relative to other
grades, while port and production outages have disrupted exports
from Venezuela, Peru and Brazil.

Strong demand for replacements for South American crudes has
driven up spot premiums for grades such as Iraq’s Basra Heavy
for loading in April and May, and buyers are also looking more
to Saudi Arabia, Kuwait and Iran for oil of similar quality.

The switch comes as U.S. oil prices strengthened against
other regional benchmarks late last year after Washington lifted
a ban on U.S. crude exports, a move that could help producers in
the United States work down a domestic supply surplus.

Unplanned outages at ports and pipelines and necessary
maintenance work at oilfields all across South America have also
tightened exports from a region that pumps about a tenth of the
world’s oil.

“This is mainly in Venezuela, where the outage of a major
port has led to the loss of 300,000 barrels per day (bpd) of
crude exports,” FGE analyst Tushar Bansal said.

Venezuela’s output could fall by 400,000 bpd this year due
to a lack of investment in the upstream sector and not enough
funds available to buy light oil for blending, Bansal said.

Latin American crude sold to Asia fell 1 percent in the
first three months of 2016 from a year ago, while Middle East
exports to Asia rose 7 percent in the first quarter, data from
Thomson Reuters Trade Flows shows.

India saw the sharpest drop in Latin American supplies, down
13 percent during the quarter, although top Asian buyer China
bucked the trend with an 11 percent rise in imports from South
America, some taken in repayment for government loans.

“It’s not so easy for Latin American crude to make their way
into Asia,” a Singapore-based trader said, pointing to a
narrower price spread between West Texas Intermediate (WTI) and
Brent after the United States ended its crude export ban.

Indian refiners, for instance, are instead snapping up the
next cheapest alternative, Iraqi Basra Heavy, the trader said.

Strong demand for this grade has pushed up its spot premium
to $1-$2 a barrel for cargoes loading in April and May, traders
said, even as a huge tanker traffic jam at Basra ports is
delaying shipments.


This is all happening at just the right time for Iran, with
sanctions targeting its nuclear programme lifted only in

Iran is expected to raise output by another 300,000 bpd in
the second half of this year, which will be mostly heavy crude,
FGE’s Bansal said.

More heavy crude supply could come from the Khafji field
jointly operated by OPEC kingpin Saudi Arabia and Kuwait.

Kuwait said in late March that it has reached an agreement
with Saudi Arabia to restart the field which was shut in October

Analysts expect the Khafji restart to take two to six months
before supply is added in the market.

(Reporting by Florence Tan; Editing by Tom Hogue)

The article Asia buys more Mideast heavy crude as Latam supplies fall was originally published at Reuters - US Energy.