Crude oil from the United States may become increasingly costly for Asian buyers as tanker rates rise, driven by heightened Chinese demand and traders anticipating additional supply from OPEC+.
Traders involved in the market, who spoke under the condition of anonymity, indicated that Chinese refiners are placing orders for crude expected to arrive before the year’s end, aiming to utilize import quotas allocated by the Chinese government. This surge in demand for supertankers is resulting in a decreased availability of vessels to transport oil from the Americas to Asia.
According to data from the Baltic Exchange, the daily rate for a very-large crude carrier shipping oil from the US to China currently exceeds $70,000. Although this figure is lower than the $90,000 rate for shipments from the Middle East to China, the transit time from the Americas is at least two weeks longer, thus increasing the overall expenses involved.
Arbitrage flows—defined as oil transported from regions such as the US to Asia in order to exploit price and cost disparities—have characterized spot trading for several months. This capability remains economically viable, as illustrated by the recent purchase of US West Texas Intermediate crude by India’s Bharat Petroleum Corp. However, market experts caution that this trend may not persist indefinitely.
Ed Finley-Richardson, a shipping analyst and founder of Contango Research, remarked, “With OPEC unwinding their quotas, we are seeing more cargoes in the East of the Suez.” He added that ship owners are optimistic about opportunities in that region and prefer to remain there.
Additionally, traders noted a rapid weakening in the Middle Eastern oil market indicators, as evidenced by narrowing time spreads for the Dubai benchmark and adjustments in differentials for grades such as Oman and Murban. This trend could render oil from the nearby Persian Gulf countries more economically attractive compared to grades sourced from the distant Americas.
While the Organization of the Petroleum Exporting Countries and its allies are incrementally increasing market supply, data suggests emerging signs of tightness within the US market. National crude oil inventories have decreased for the second consecutive week, reaching their lowest levels since January, according to government reports.
