Mideast concerns lift US WTI crude prices to Asia

Market: Crude oil
16/09/26

Spot values of US WTI crude on a delivered northeast Asia basis hit a record high after renewed US-Iran hostilities and Mideast Gulf crude supply disruptions boosted Asian demand for US crude as an alternative supply source.

Traders pegged light sweet WTI arriving in December in northeast Asia at premiums of $30-35/bl against November Dubai assessments, in line with a recent deal. This marks a record high for WTI's value on a delivered northeast Asia basis since Argus assessments started in November 2019.

A South Korean refiner bought 1mn bl of December-delivery WTI at a premium of $30-35/bl to November Dubai assessments this week, market sources said. This was higher compared to earlier purchases of around 12mn-15mn bl of December-delivery US crude, primarily comprising WTI, by mainly northeast Asian refiners that were concluded at premiums of $20-30/bl to Dubai.

US crude has emerged as a key source of stable alternative supply for Asian buyers after the US-Iran war disrupted crude exports originating from within the Mideast Gulf. Recent attacks on Saudi Arabia's 7mn b/d East-West crude pipeline have further tightened crude supplies available to Asian refiners. These supply fears have driven up the price of Abu Dhabi light sour Murban, pushing Asian buyers to consider stepping up their purchases of WTI crude, market sources said.

WTI competes closely with Murban in the Asian market. Murban is currently around $15/bl higher on a similar delivered basis compared with the price of WTI.

The steep increase in spot Murban prices has opened the arbitrage for shipping WTI to Asia, a southeast Asian refinery source said. But some buyers may not be able to completely replace Murban with WTI, either because of refinery configurations or term commitments for the Abu Dhabi crude, traders said.

Elevated freight costs have also contributed to the rise in WTI prices for December arrival in northeast Asia. The Argus-assessed freight rate for a 270,000t tanker from the US Gulf coast to South Korea/Japan was at $20.78/bl on 15 September, having risen steadily from $11.65/bl at the start of September.

By Reena Nathan, YouLiang Chay, Rhalain Reyes and Fabian Ng

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