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Taiwanese refiner Formosa Petrochemical Corp has bought its first-ever cargo of U.S. crude oil—Mars grade—as part of efforts to diversify supplies, Reuters reports, citing a company spokesman.
“We will try out the U.S. crude at our refinery, whether it’s suitable, and decide later if we’ll include the grade in future spot purchases,” KY Lin said.
Formosa Petrochemical is not the first Taiwanese refiner to turn to U.S. crude. Its peer CPC Corps imports at least 4 million barrels a month of U.S. oil. The wider Asian market has also seen an increase in shipments from the United States this year as Middle Eastern and Russian Far East grades have become costlier because of the OPEC+ production cut agreement from the end of 2016.
Reuters quotes an unnamed source as saying Formosa bought the Mars crude at a premium of US$0.50 to US$1 per barrel to the Dubai benchmark, just a little more than Oman crude free-on-board shipments scheduled for September.
Now that the OPEC+ club has started ramping up production once again to cap the oil price rise, their export rates might decline but the ramp-up coincides with the heating up of the trade dispute between the United States and China, which has prompted the latter to curb imports from the former.
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This means that U.S. producers need new markets, and since Asian refiners are the most oil-hungry ones out there, finding alternative markets could be a quick job.
U.S. crude oil production last week hit 11 million barrels daily, as estimated by the Energy Information Administration. This is a historic high and the trend is upward, with U.S. light crude seeking more international markets in the future.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.