S. Korean buyers seek more Brent-linked crude to replace Mideast oil

GS Holdings

21/04/2017 07:59

* Seek more oil from Europe, Africa 
    * Brent-Dubai spread narrowest since August 2015 
    * Arbitrage supply ample as China import demand falls 
 
    By Jane Chung and Florence Tan 
    SEOUL/SINGAPORE, April 21 (Reuters) - Oil buyers in South 
Korea are expected to take advantage of relatively cheap Brent 
against Dubai and step up purchases of low-sulphur crude in 
early third quarter, reducing demand for the Middle East oil, 
four refining sources said on Friday. 
    Refiners in the world's fifth largest crude oil importer are 
seeking crude from the North Sea and Africa, they said, which 
could help reduce surplus oil in Europe that was accumulated 
during the peak refinery maintenance season. 
    "We are actively looking at Brent-related crude grades," 
said Kim Woo-kyung, a spokeswoman at SK Innovation  096770.KS , 
owner of South Korea's top refiner SK Energy. 
    SK Energy bought its first Russian Urals crude in a decade 
earlier this year.  urn:newsml:reuters.com:*:nL4N1G22CW 
    An official from another South Korean refinery said they are 
also considering buying Brent-linked crude such as those from 
Africa as prices of Brent oil  LCOc1  have weakened. He declined 
to be named due to the sensitivity of the matter. 
    A slowdown in China's oil demand also created more 
opportunities for South Korean buyers to purchase arbitrage 
supplies, a third buyer said. 
     
    BRENT-DUBAI NARROWS 
    The premium for June Brent to Middle East crude benchmark 
Dubai dropped below $1 a barrel this month, the narrowest since 
August 2015, prompting some buyers to switch to sweet crude 
which is easier to process.  DUB-EFS-1M  
    Brent's market structure is also in a wider contango than 
that for Dubai, making long-haul shipments feasible. In a 
contango market, oil becomes more expensive in later months. 
    Six million barrels of North Sea crude were loaded in April 
for Asia, with another 2 million barrels planned to be loaded 
next week onboard supertanker Sara for South Korea, trade flow 
data on Thomson Reuters Eikon showed. 
    Another 1 million barrels each of Urals crude and Libyan El 
Sharara crude will arrive at Yeosu, South Korea, in May, the 
data showed. 
    "There are still some arbitrage cargoes to Asia arriving in 
July," the third buyer said, referring to oil from Europe and 
the United States. 
    Hyundai Oilbank bought the country's first import of U.S. 
Southern Green Canyon (SGC) crude this year.  urn:newsml:reuters.com:*:nL3N1GD24L 
    South Korean refiners also receive freight rebates from the 
government for shipping non-Middle East crude on supertankers as 
an incentive to diversify imports away from the Gulf. 
    South Korea imports more than 80 percent of its oil from the 
Middle East. 
 
 (Reporting by Jane Chung in SEOUL and Florence Tan in 
SINGAPORE; Editing by Subhranshu Sahu) 
 ((Florence.Tan@thomsonreuters.com; +65 6870 3497; Reuters 
Messaging: florence.tan.thomsonreuters.com@reuters.net)) 
 
Keywords: KOREA OIL/