* OPEC cuts lift Dubai price against Brent, WTI
* Arbitrage open for European oil to Asia
* Exports from North Sea, Azerbaijan to Asia hit record in
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By Florence Tan and Mark Tay
SINGAPORE, Jan 11 European and Chinese traders
are shipping a record 22 million barrels of crude from the North
Sea and Azerbaijan to Asia this month, seeking to plug any
supply gap left by OPEC production cuts.
Over 11 million barrels of North Sea Forties crude have
either been offloaded or are on their way to Asia, adding to a
record 11 million barrels of Azeri crude oil from Azerbaijan,
Reuters oil trade flows data showed.
The record export volumes come on expectations of tighter
Middle East crude supplies due to plans by the Organization of
the Petroleum Exporting Countries (OPEC) to cut production in an
attempt to prop up prices.
Seeing an opportunity to sell North Sea oil profitably in
arbitrage deals to Asia, seven supertankers chartered by
commodity traders Vitol and Mercuria, European oil major Royal
Dutch Shell, and China's refiner Unipec,
have either delivered or are expected to soon offload European
crude to China and South Korea this month, according to trade
sources and Reuters data.
"Asia needs the oil, Europe has it. The OPEC cut has raised
prices, and that now makes it profitable to send European oil to
Asia," said one senior trader with knowledge of the deals on
condition of anonymity as he is not allowed to talk to media.
December's OPEC deal, in which the group agreed to cut
production by 1.2 million barrels per day (bpd) in the first
half of 2017, pushed up benchmark price Dubai DUB-1M-A against
Brent and West Texas Intermediate, allowing Asia
to pull more competitively priced supplies from the Atlantic
An ongoing Brent contango, a market structure where oil
becomes more expensive in future months, also enabled traders to
lock in profits for crude on long voyages.
Shipping North Sea Forties crude from its load port Hound
Point in Britain to customers in North Asia, including Japan,
South Korea and China, takes over six weeks.
BATTLE FOR ASIA
The deals highlight the predicament facing OPEC and other
producers that have agreed to cuts, including Russia and Oman.
While cutting supplies may temporarily lift prices, this
gives other producers like western oil firms an opportunity to
fill the gap and sell oil to Asia, the world's biggest demand
"The real market battleground is East of Suez," said John
Driscoll, director of Singapore-based energy consultancy JTD
Energy Services, referring to the Suez Canal through which many
tankers ship oil between Europe, the Middle East, and Asia.
The ships now carrying European oil to Asia have 11 million
barrels of Forties crude loaded, beating a previous record of 10
million barrels in December 2015, Thomson Reuters Eikon trade
flow data showed.
And more oil is to come. Two more Very Large Crude Carrier
(VLCC) supertankers with 2 million barrels of Forties crude each
are due to arrive in North Asia in February, while three VLCCs
have been provisionally booked to load oil this month for
arrival in Asia in March-April, the data showed.
(Additional reporting by Amanda Cooper in LONDON; Editing by
Henning Gloystein and Richard Pullin)