* 22.6 million barrels of crude sold from storage in March
* Chinese demand, more crude deliveries to Asia trigger
* Crude oil shipments to Asia to hit record levels in April
By Mark Tay
SINGAPORE, April 20 Crude oil sales from storage
tanks around Singapore rose to an 11-month high in March, with
nearly half of the volumes going to China and traders clearing
inventories ahead of record shipments to Asia expected to arrive
Traders sold a total of 22.6 million barrels of crude from
storage in Singapore, southern Malaysia and northern Indonesia
in March, Thomson Reuters Eikon trade data showed. Around half
of the volumes went to China, partly to help quench the
still-growing demand from the country's independent refiners.
"Strong demand from the teapots played its part, as they
feared delays to their June quota renewal, and so (they)
over-bought during Q1 2017," said Virendra Chauhan, oil analyst
at Energy Aspects.
China started granting independent refiners, sometimes
called teapots, crude oil import rights from 2015, resulting in
a surge of overseas orders in 2016. That has continued into this
year, with China's overall March crude imports hitting a record
at nearly 9.2 million barrels per day (bpd).
Despite the large sales this pulled from Singapore storage,
the inventory drawdown does not necessarily indicate that an
effort led by the Organization of the Petroleum Exporting
Countries (OPEC) to cut production to tighten supplies and prop
up prices is bearing fruit.
"It's too early to say (if this means the OPEC output cut is
working). Of course China buying almost 600,000 barrels per day
more crude in Q1 2017 has helped, but we don't see that as a
sustainable pace of growth," Chauhan said.
There are also concerns that while China's surging imports
eat up crude volumes, they may contribute to a fuel overhang as
Chinese refiners churn out more products like gasoline and
diesel than the market can absorb.
MORE OIL ARRIVING
Traders said the storage clearances were also in part due to
anticipation of large volumes coming into Asia from other
regions in the coming weeks.
Crude shipments to Asia will rise to a record of 744.3
million barrels in April, about 20 million barrels more than
March deliveries, according to Eikon trade data.
"The 20 million (additional) barrels and the 22.6 million
barrels (sold from storage) – there is some kind of correlation
there," said Oystein Berentsen, managing director for oil
trading company Strong Petroleum in Singapore.
"They are refilling their storage tanks ... The contango is
a bit deeper, so if you already have an empty tank and you are
paying 50 to 60 cents a month then it makes economical sense,"
Producers in Latin America, the United States and the
Mediterranean have been taking advantage of higher prices in
Asia than in the Atlantic basin, with the trade data showing
they will ship a record 87.6 million barrels of crude to Asia
The April-arrival Atlantic Basin crude shipments to Asia
were likely traded in late-January or February when U.S. WTI
crude prices were about $2.50 a barrel below global benchmark
Brent crude CL-LCO1=R, making the trades profitable.
Oil shipments from the U.S. Gulf Coast, via the Cape of Good
Hope, typically take up to 60 days to reach Asia.
(Reporting by Mark Tay, with additional reporting by Henning
Gloystein; Editing by Tom Hogue)