Very odd news in the international crude markets this week.
Reports confirm a first-of-a-kind event in this space. Oil consumers in India buying crude from a far-away place: Eastern Canada.
Indian Oil Corp. reportedly purchased a cargo of White Rose crude. Coming all the way from offshore Newfoundland.
The buy seems to suggest structural changes afoot in the global oil markets. Never before have Indian users gone so far afield to secure supply.
The question is: why?
The reason has something to do with the type of crude. White Rose is a light, sweet crude blend. Very similar in quality to the world's most well-known sweet crude, Brent.
For refiners configured to use sweet crudes like Brent, White Rose is thus an option.
But it’s not a cheap option. White Rose has recently been selling at a premium to dated Brent. Currently going for over $109 per barrel.
The fact that Indian buyers are paying a premium to Brent in order to secure Canadian oil suggests they are growing somewhat desperate. Meaning that Brent and other sweet blends must be in shorter supply than usual.
This "search for sweet" may explain why Brent prices have been so strong against U.S. blends like WTI lately. With the spread between these crudes currently sitting north of $10 per barrel.
The buying pressure on Brent-type blends should keep prices strong. Meaning that explorers developing such fields could see higher profits than their North American counterparts.
Which could in turn create a rush for international oil firms. A sector that's of late been somewhat neglected in the markets.
Think North Sea, West Africa, Southeast Asia, and even spots like Colombia (which this month sold its first-ever crude shipment to Italy). These could well be the next hotspots for oil investors.
Here's to the sweeter things,
By. Dave Forest