U.S. West Coast refiners snap up Russian crude cargoes
SINGAPORE - Refiners on the U.S. West Coast and Hawaii have stepped up purchases of Russian crude, taking advantage of a narrow gap between U.S. and global prices to guard against a seasonal shortage of Alaskan supply, trade and industry sources said.
Up to four tankers were expected to carry nearly 3 million barrels of Russia’s ESPO crude from Kozmino near the city of Vladivostok to refineries in the United States this month and next, the sources said.
That will help Russia diversify beyond key buyers in China, South Korea and Japan at a time when Asian markets are battling oversupply. Sanctions against Russia over its actions in Ukraine bar U.S. companies from drilling in the country, but crude purchases are still allowed.
But traders said the shipments marked only a temporary trend as refineries were buying amid uncertainty over the supply of Alaska North Slope (ANS) crude over the summer. ANS is regularly shipped to the U.S. West Coast, but production normally falls in summer due to field maintenance.
“I don’t see a huge pull from the West Coast apart from what has been bought already,” said one trader with a company operating a California refinery.
Reuters ship tracking data confirms the Aegean Power tanker loaded 730,000 barrels of ESPO last week and is due to arrive at the Long Beach refining hub in Los Angeles on July 9.
One industry source, who was not authorised to speak with media, said Chevron Corp likely bought the cargo for processing at its El Segundo refinery in Los Angeles. A spokesman for the oil major declined comment.
Two or three additional cargoes will load either later this month or next, with Valero Energy Corp shipping to one of its two refineries on the U.S. West Coast, and Par Petroleum taking at least one cargo to Hawaii, according to four trade and industry sources.
“More sweet Asian crude is available for mid-Pacific and U.S. West Coast refineries these days,” Par Petroleum Chief Executive Joseph Israel said in an email, without confirming or denying buying ESPO.
“Increased North American crude production has significantly shifted crude flow and pricing parity in and out the Pacific,” he said.
A Valero spokesman declined to comment on the issue, but said the company was “lessening the reliance on foreign crudes”.
The price gap between U.S. crude and international benchmarks like Brent has tightened, with global prices weighed down by near-record OPEC production while the U.S. market has been supported by slowing output and higher gasoline use.
ESPO was regularly shipped to the United States after production began in 2009, but trade slowed. In 2013 and 2014, a total of six ESPO cargoes were exported to U.S. refiners, with the latest in August last year, Reuters ship tracking data showed.
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