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Sweet crude grades from the U.S. Gulf Coast have seen increased interest from Asian buyers in recent weeks, as many refiners in the world’s largest oil-importing region are purchasing more of the sweeter crude varieties, energy analytics firm Vortexa says.
Asian refiners are looking for more crude of the sweeter variety as high energy costs are making sour crude processing more expensive. The high cost of hydrogen, which is used to remove the sulfur from the sour grades in diesel hydrocrackers, has risen in recent months amid the natural gas crunch in Europe and Asia.
So, Asia is now expected to see a sharp increase in sweet crude shipments in November, Vortexa said in an analysis this week.
Asia is set to receive 3.7 million barrels per day (bpd) of sweet crude this month, up from 3.1 million bpd in October. This would also reverse the declining trend of sweet crude intake in September and October, according to Vortexa. Chinese imports of sweet crude are expected at 1.6 million bpd in November, the highest in seven months.
The U.S. Gulf Coast is well-positioned to fill the gap of sweet crudes from West Africa, where Nigeria and Angola are struggling to boost crude oil production and exports, Vortexa said.
According to secondary sources in OPEC’s latest Monthly Oil Market Report (MOMR), Nigeria, Gabon, and Equatorial Guinea saw their output decline last month. The steepest drop was in Nigeria, whose production fell by 45,000 bpd to 1.354 million bpd. Nigeria’s output was more than 200,000 bpd below its cap of 1.6 million bpd. The country has been struggling to reach its quota, while frequent force majeure events have also contributed to the much lower production than allowed under the OPEC+ deal.
“This leaves the US Gulf Coast (PADD 3) as the next alternative supply source for Asian sweet crude buyers,” Vortexa said.
PADD3 shipments to Asia are estimated at around 1.1 million bpd departing in November, up from about 760,000 bpd for September-October.
“Should total US crude exports continue their upward trajectory, we could see even more flows to Asia in the coming weeks,” Vortexa noted.
