Asia is set to import record volumes of West African crude oil this year as Chinese buyers come into the market to fill inventories.
Imports of West African crude oil by Asian refiners and end-users have dipped to 1.49 million barrels per day (bpd) this month, down more than 10 per cent from October, but their purchases for December have recovered sharply to around 1.75 million bpd, according to data compiled by Reuters.
A Reuters survey of trade and shipping sources shows refiners in China, India, Indonesia and other Asian countries have bought more than 660 West African crude oil cargoes this year, carrying a record 1.72 million bpd.
This year’s total is up from just under 600 cargoes in 2011 and compares with 656 cargoes in 2010, the previous record year.
“Chinese traders have been hoovering up cheap West African cargoes on something of a buying spree,” said a strategist with a large U.S. oil refiner. “Demand from the Gulf of Mexico, South America and Europe has been low, so the Chinese have been in the market, mopping up.”
Strong economic growth in China and other emerging economies has driven a rapid increase in demand for crude oil in Asia.
West African crude oil is typically “sweet,” meaning it contains low levels of corrosive sulphur compounds, and it meets Asian demand for heavy industrial fuel oil and distillates such as kerosene.
But Nigerian and Angolan oil exports are now competing with new U.S. domestic production of sweet crudes from shale formations in Texas and North Dakota, which have driven down the market for high-quality oil.
U.S. refiners, who traditionally queued up to buy West African crude, now use far more domestic feedstock, leaving Asian end-users as the dominant buyers.
Hurricane Sandy, which closed many U.S. refiners along the U.S. Atlantic coast at the end of last month, exacerbated this trend, leaving many West African cargoes loading in November and December unsold for long periods.
“It’s been a buyers market – and the buyers are mostly Asian,” said a crude oil trader with a European refiner.