BP looks to sell nearly 3 million barrels of US oil to Asia as prices rise
07 December 2016
Oil major BP is shipping almost 3 million barrels of US crude to customers in Asia ahead of a planned production and supply cut announced by the Organisation of Oil Producing and Exporting Countries (Opec) amidst a spike in oil prices that makes oil exports to Asia a viable proposition.
The complex operation, involving one of the world's longest sea routes, seven tankers and a series of ship-to-ship transfers, is likely to become viable once the planned Opec production cut helps boost oil prices.
BP's efforts to develop new routes to sell swelling supplies of cheap US shale oil to Asia, the world's biggest consumer region, could again exert downward pressure on oil prices.
While US crude is cheap and its exports are allowed now, the distance and the complexity of shipping crude to distant Asian consumers has limited US oil sales to the region.
A Reuters report quoting trade sources said BP will now use its global shipping and trading network to overcome US port limitations and the need to transfer oil between ships off Malaysia to split cargoes for customers across Asia.
"Keeping regional price differentials, different tanker rates, and the forward price curve in mind while considering the delivery needs and schedules of your counterparties is not something many oil trading firms can do," said a shipping source in Singapore, who had knowledge of the operations.
"BP is one of perhaps half a dozen firms capable of doing so," he added, speaking on condition of anonymity as he was not authorised to publicly discuss operations.
Oil price settles down on Tuesday with the US light, sweet crude for January delivery settling $1.06 cents (or -2.05 per cent) down at $50.73 a barrel on the New York Mercantile Exchange (NYMEX). The loss halted what was a four-day winning streak for West Texas Crude Oil.
North Sea Brent settled down to $53.70 a barrel, down 2.24 per cent (or $1.23). Prices this week had reached yearly highs. Oil futures during the last four trading sessions increased by 15 per cent after Opec decision to cut output by 1.2 million barrels, nearly 1 per cent of global supply.