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Delays in the delivery of U.S. crude oil cargoes to Asian refineries are prompting traders to consider buying feedstock for refineries on the spot market, sources from the industry told S&P Global Platts.
According to one oil trading manager from North Asia, at least two South Korean refiners and one Chinese plant are expecting their cargoes, consisting of Eagle Ford crude as well as Mexican blends, to arrive with a delay of between one and two weeks.
Traders and refiners who had bought Mexican crude are also bracing for delays in their September deliveries, which could be because most of their cargoes are to be co-loaded with U.S. crude.
These delays could result in the cancellation of traders’ purchase deals with refineries, which will likely force them to turn to the regional spot market for oil and condensate. There is condensate from Iran’s South Pars field for sale on the spot market as well as Australian ultra-light crude, although the amount of the latter that is available for immediate and near-term loading is believed to be small.
U.S. crude oil loadings were affected by Hurricane Harvey, which hit the Texas Gulf coast last week and led to the shutdown of refineries and production capacity in the Gulf. According to an S&P Platts report, around 2.2 million bpd in refining capacity was shut down or in the process of being shut down as of Monday morning. Refineries in the Corpus Christi area had shut down ahead of the storm, but those in the Houston area only began shutting down yesterday, prompted by the floods that Harvey brought.
New tornado warnings and more floods in the Houston area over the next few days could exacerbate the oil cargo loading predicament that Asian traders and refiners have found themselves in, along with the sellers.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.