January 31, 2020 / 8:40 AM / in 22 days

Asia's U.S. oil imports to rebound in May after freight rates drop -sources

SINGAPORE (Reuters) - Asia’s crude oil imports from the United States are set to rebound in May after freight rates for ships to carry U.S. crude to north Asia fell by 27% from a week earlier, trade and shipping sources said on Friday.

A rise in Asia’s oil imports from the United States could displace demand for similar-quality oil from the United Arab Emirates, Africa and Europe.

The cost of chartering a Very Large Crude Carrier (VLCC) to move 2 million barrels of U.S. crude to China has dropped to about $8 million on Friday, down from $11 million a week ago, the sources said.

“More U.S. cargoes will come to Asia. It has been slow in the past two months,” a source with a north Asian crude buyer said.

The volume of U.S. crude to arrive in Asia in March is estimated to be at the lowest in two years while April’s volume is even lower, Refinitiv data showed. U.S. sanctions on Chinese shipping companies caused freight rates to surge in fourth quarter and raised the costs for U.S. oil exports to Asia.

Freight rates could come under more downward pressure as the United States will likely lift sanctions within days on units of Chinese tanker company COSCO that Washington accused of transporting Iranian oil.

“Timing-wise it could not have been worse because Q1 is also when there are maximum new builds to be delivered,” said Anoop Singh, head of tanker research in Asia at Braemar ACM Shipbroking.

“We expect 14 VLCCs to be delivered in Q1 with 9 of these already on water.”

However, a virus outbreak is expected to reduce China’s oil demand in the first quarter, clouding the outlook for China’s U.S. crude imports.

The world’s largest crude oil importer had been expected to increase energy purchases from the United States as part of the Phase 1 trade deal between the countries.

Reporting by Florence Tan; Editing by Christian Schmollinger and David Evans

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