U.S. oil exports to Japan, South Korea soar as refiners reap steep discounts

U.S. oil exports to Japan and South Korea will rise to record highs this month as Asian refiners take advantage of the steep discounts American sellers are offering after losing Chinese customers amid the trade dispute between Washington and Beijing.

Ship tracking data in Thomson Reuters Eikon showed that oil exports from the United States to South Korea in September will rise to a record average of at least 230,000 barrels per day (bpd). U.S. shipments to Japan will also rise to a record average of at least 134,000 bpd, the data showed.

Two traders and a brokerage source said South Korean and Japanese refiners have been taking advantage of steep discounts of up to $10 per barrel between the U.S. crude benchmark West Texas Intermediate (WTI) CLc1 that American producers base their crude sales on and the international Brent crude LCOc1 benchmark.

U.S. prices, including benchmark WTI, are under pressure amid rising production and a decline in Chinese buying interest because of the trade dispute which is forcing U.S. sellers to find new buyers for their crude.

Meanwhile, the Brent benchmark is supported by several supply disruptions including the Iranian sanctions, tumbling exports from Venezuela, and lingering concerns about Libyan production amid clashes between internal groups.

There are signs that Saudi Arabia and Russia will increase output to take up Iranian market share, which should ease Brent prices. Meanwhile, U.S. prices could rise because the surge in demand may exacerbate logistical bottlenecks since the current domestic pipeline, port and storage infrastructure is not geared to handle exports on this scale. This congestion is already causing offers to rise for U.S. supply for loading towards the end of the year, although no fixed deals have been reported, said a third trader in Singapore.

U.S. oil exports to Japan, South Korea soar as refiners reap steep discounts, Reuters, Sep 11