Asia is expected to step up imports of U.S. West Texas Intermediate crude in the fourth quarter after Middle East oil prices strengthened and opened the arbitrage window, trade sources said.
Middle East crude benchmarks Dubai and Murban gained this month on the back of robust demand for high-sulphur oil in Asia, narrowing their price gaps with light-sweet U.S. WTI oil, they said.
WTI's arbitrage has been wide open to Asia for the past week for cargoes arriving in early November, said June Goh, a senior analyst at Sparta Commodities.
U.S. producer Occidental (OXY.N) has sold WTI crude to Japanese refiner Taiyo Oil, the sources said. The cargo was sold at a premium of about $3.50 a barrel to October Dubai quotes for October delivery, one of the sources said.
WTI crude could be delivered at 50-75 cents a barrel lower versus similar quality Murban oil to North Asian refiners depending on suppliers, a Singapore-based trader said.
Two other traders said WTI is at least 30 cents cheaper than the light-sour Murban grade.
Falling costs for a very large crude carrier to send 2 million barrels of crude from the U.S. Gulf Coast to Asia are also enabling the trade.
The costs for a VLCC to ship U.S. crude to China, Singapore and West Coast India fell $200,000 to $6.5 million, $5.5 million and $5.35 million, respectively, on Wednesday, SSY's daily tanker rates on LSEG Workspace showed.
Murban's supply has also tightened after Abu Dhabi National Oil Co reduced exports of its flagship grade by diverting the oil to its domestic refinery, the sources said, supporting the benchmark.
"We anticipate more Asian buyers to secure WTI cargoes especially with Murban looking expensive whilst taking opportunity to diversify against AG (Arabian Gulf) crude," Goh said.
Middle East crude prices are also supported by a threat by U.S. President Donald Trump to impose secondary tariffs on countries that buy Russian oil, she said, adding that Indian refiners would look to buy oil from the Gulf to replace Russian supplies.
China, India and Turkey are the key importers of Russian crude.
