August 7, 2012 / 3:32 PM / 8 years ago

UPDATE 1-Asia takes record W.Africa oil as buyers shun Iran

(Updates throughout with detail, comment, tables, graphics)
    * Asia buys around 1.74 mln bpd W.African oil Jan-Sept 2012
    * Imports up 8 percent from first nine months of 2011
    * Asian imports average 1.64 mln bpd in Q3, vs 1.46 Q3 2011
    * Iran sanctions, high Asian demand, lower prices spur imports

    By Christopher Johnson
    LONDON, Aug 7 (Reuters) - Asia is set to import record volumes of oil from
West Africa this year as increasing supplies of high quality crude drive down
its export prices and some buyers shun their traditional supplier, Iran.
    A Reuters survey of trade and shipping sources shows end-consumers in China,
India, Indonesia and other Asian countries have bought around 1.74 million
barrels per day (bpd) of West African crude for loading in the first nine months
of this year, up around 8 percent from the same period in 2011.
    "This year is going to see another record," said a senior crude oil trader
at a large European refiner.
    Strong economic growth in China and other industrial economies across Asia
is driving a rapid increase in demand for crude oil.
    West African crude oil is typically "sweet", containing low levels of
corrosive sulphur compounds, and much of it is also relatively heavy, meeting
Asian demand for heavy industrial fuel oil and distillates such as kerosene.
    Africa's two biggest oil producers, Nigeria and Angola, have been well
placed to meet this extra consumption and exports from the West African region
to Asia have risen by more than 50 percent over the last five years, Reuters
data shows.
    In the last year, this trend has been accelerated by a big jump in U.S.
output of light, high quality crudes. This new domestic production has
supplanted oil that used to be imported from Africa and also forced down global
spot prices of some grades of West African crude oil.
    At the same time, many oil refiners that used to take Iranian oil have been
scared off by the U.S. and European Union campaign against the Islamic Republic
and have instead taken attractively priced oil from Africa.
 
    
    IRAN
    "The United States will import much less crude oil from Africa this year and
Asia is taking many of those barrels," said Carsten Fritsch, oil analyst at
Commerzbank in Frankfurt.
    "Asian buyers are also replacing Iranian oil with West African barrels
because, with all the political problems and the extra insurance costs
associated with Iranian oil, it is much easier for them to look elsewhere."
    Asian buyers, who usually negotiate their spot and term import contracts at
least a month before loading, have committed to take an average of around 1.64
million bpd of West African crude in the third quarter of this year, up from
around 1.46 million bpd in the third quarter of 2011.
    August has been a particularly strong month for imports into Asia, traders
say, with 60 cargoes carrying around 1.84 million bpd heading east. China, the
world's top energy consumer, has taken around 28 cargoes, while Indian refiners
have bought 21 cargoes, traders say.
    September looks like a slower month for imports into Asia, traders say, with
price pressures taking their toll on volumes.
    West African crude oil is priced against North Sea Brent crude BFO-
, which has been strong relative to Dubai crude DUB-, eroding some of
the price advantages enjoyed by Nigerian, Angolan and other West African grades.
    The front-month Brent/Dubai Exchange of Futures for Swaps (EFS)
DUB-EFS-1M, a market reflecting relative costs for Asian buyers, is near its
highest for eight months.
    "The EFS has widened a lot and that has affected Asian imports for September
loading," said a trader with a large Asian oil company.
    But the flow of crude oil to Asia from West Africa is likely to pick up
again going into the fourth quarter as Chinese refiners start to restock again,
traders say, ensuring total volumes in 2012 exceed previous years.

            SEPT             AUGUST           JULY             JUNE     
 COUNTRY    CARGOES   BPD    CARGOES   BPD    CARGOES   BPD    CARGOES   BPD
 China      26       823     28       858     29       889     32       1,013
 India      15       475     21       644     12       368     12       380
 Indonesia  3        95      4        123     0        0       2        63
 Taiwan     4        127     5        153     6        184     4        127
 Japan      0        0       0        0       2        61      3        95
 S. Korea   0        0       0        0       0        0       0        0
 Others     2        63      2        61      0        0       1        32
 TOTAL      50       1.58 M  60       1.84 M  49       1.50 M  54       1.71 M
 Notes for table above:
 * BPD = thousands of barrels per day / M = millions
 * Totals may not agree due to rounding
       
 Quarterly imports into Asia from West Africa (millions of barrels per day)
           Q1     Q2     Q3     Q4
  2012   1.82   1.76   1.64      -
  2011   1.79   1.57   1.46   1.46
  2010   1.71   1.73   1.67   1.71
  2009   1.00   1.52   1.53   1.46
  2008   1.21   1.24   1.15   1.01
 
 (Reporting by Christopher Johnson; Editing by Anthony Barker)
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