Norway’s new Johan Sverdrup oil grade is making inroads in Asia, threatening to undermine gross sales of comparable crudes from Africa and South America.
China’s Unipec, no less than one of many nation’s impartial refiners and South Korea’s Hyundai Oilbank Co. have purchased Johan Sverdrup for December supply, stated merchants and refinery officers in Asia. The North Sea oil produced by Equinor ASA has been likened to Brazil’s Lula and Angola’s Saturno crudes.
Oil with low-sulfur content material is in demand forward of stricter ship-fuel guidelines that take impact Jan. 1, whereas provide of medium-density crude has been tight as a result of assaults on Saudi Arabia and U.S. sanctions on Iran and Venezuela. Johan Sverdrup has each of these qualities, and it’s additionally attractively priced, which can have lured refiners which are sometimes cautious about new grades.
If Johan Sverdrup continues to realize traction it might jeopardize exports of its rival grades to the world’s high crude-consuming area. Angolan and Brazilian oil accounted for 10% and eight%, respectively, of Chinese imports within the first eight months of the yr, in line with authorities information. By comparability, Norwegian crude had a minuscule zero.04% share.
“I’ve little doubt we’ll see a pattern of extra Norwegian flows to Asia, particularly China, within the coming months,” stated Sengyick Tee, an oil analyst at SIA Energy in Beijing. “Given the hovering freight charges and excessive Chinese stockpiles, Equinor might want to value it attractively,” he stated, including that the corporate has a robust presence amongst Shandong’s teapots.
Shandong Qingyuan Group, a Chinese teapot, purchased about 1 MMbbl of Johan Sverdrup at a premium of $6 to $6.50/bbl to Brent crude on a delivered foundation, stated merchants who requested to not be recognized as the knowledge isn’t public. That’s round $1/bbl cheaper than Lula and $zero.20 to $zero.30 lower than Saturno, the merchants stated.
Unipec — the buying and selling arm of Chinese large Sinopec — has purchased two shipments of Johan Sverdrup for October loading, whereas Hyundai Oilbank took an undisclosed quantity of the grade, the merchants stated. The costs for these offers aren’t out there.
Whether or not Equinor can preserve providing the grade at decrease costs over the long run stays to be seen. The Norwegian firm might have hedged delivery prices prematurely, stated one of many merchants. Equinor can also be giving consumers the choice to co-load with different varieties, which can assist scale back the price of delivery to Asia.
Johan Sverdrup has an API gravity studying of 27 levels with sulfur content material of zero.eight%. While that’s a barely larger sulfur studying than most candy crudes — loosely outlined as having zero.5% or much less of sulfur — processors trying to produce extra IMO 2020-compliant gas might search out the grade as a part of a lower-sulfur oil feedstock mix.
The disruption of Middle East provides and declining output from Angola have created a market opening in Asia for Johan Sverdrup, stated Senthil Kumaran, a senior oil analyst at trade guide FGE in Singapore.
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