January 12, 2017 / 9:01 PM / 6 months ago

U.S. East Coast refiners binge on Algerian crude

3 Min Read

NEW YORK, Jan 12 (Reuters) - U.S. East Coast refiners are in the midst of their biggest buying spree of Algerian crude in years as they take advantage of cheap oil spilling out of the region, traders said on Thursday.

The renewed interest in Algerian crude comes as the country ramped up exports and fellow African OPEC producers Libya and Nigeria have seized on their exemption from global production cuts and turned on their oil spigots, flooding a well-supplied market in need of new customers.

"It's real competitive, and I don't think it's going to stop any time soon," said a U.S. East Coast oil trader, of the rise in Algerian imports.

The surge also comes as U.S. East Coast refiners have all-but abandoned domestic crude via rail out of North Dakota in favor of waterborne imports following the collapse of the wide discount CL-LCO1=R U.S. crude enjoyed against the global benchmark Brent, during the outset of the shale revolution in 2011 until the back half of 2015.

In October, U.S. East Coast refiners imported 156,000 barrels per day of Algerian crude, the second-highest monthly tally ever and the most since 2007, the latest U.S. Energy Information Administration figures show. November and December were also active months, after nearly two years of limited buying.

Algeria's crude oil exports hit record highs in October, a source from state-run oil company Sonatrach told Reuters.

The biggest buyers of the October Algerian cargoes were Philadelphia Energy Solutions and Monroe Energy, followed by Phillips 66, EIA data shows. All three are historically big buyers of Bakken crude, which is comparable to North and West African grades.

The buying continued in November and December, with 7,825 bpd and 109,765 bpd, respectively, imported into the East Coast, Reuters shipping data showed.

In the 21 months before October, there were only six months with Algerian imports into the U.S. East Coast; none higher than 41,000 bpd, EIA data shows.

October offers the clearest picture of how oil flows have shifted along the U.S. East Coast - total foreign imports into the region reached 1.07 million bpd, the highest in 59 months, while domestic crude volumes by rail fell to 129,500 bpd, the second-lowest total in 46 months.

Sarah Emerson, managing principal at consultancy ESAI Energy LLC, said she expects African grades to continue to hit the East Coast, particularly as Libya and Nigeria boost production.

"The one thing that helped boost rail into the East Coast was Libya production disappeared. That's not the case any more, and I wouldn't be surprised if we start seeing Libyan barrels on the East Coast," Emerson said.

Reporting By Jarrett Renshaw; Editing by Marguerita Choy

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