Singapore—Asian crude oil importers are broadly unfazed by the blockage and congestion at the Suez Canal as the bulk of their feedstock shipments come from different sea lanes, but some South Korean refiners are expecting a delay of around one week for a few light sweet grades loaded from export terminals in the Mediterranean Sea.
Asia's overall crude imports have not been affected as a vast majority of North Sea, US and African crude bound for the Far East are delivered in VLCCs via South Africa's Cape of Good Hope route, refinery feedstock trading sources in Singapore, Seoul, Beijing, Hong Kong, Tokyo and Jakarta said.However, a few light sweet crude grades delivered from the Mediterranean market, including Azerbaijan's Azeri Light and Kazakhstan's CPC Blend, occasionally come in smaller Suezmax tankers, taking the canal route.
Suez Canal: A critical chokepoint in global energy flows
One or two CPC Blend crude shipments fixed for April-May arrival into South Korea could be delayed for a while, but not too long, refinery officials in Seoul told S&P Global Platts.
The South Korean refinery officials declined to provide specific details of the tankers affected or waiting in line to pass the Suez Canal, but they estimated the delay could be around 7-10 days.
CPC Blend crude first gets delivered from production facilities to the Russian Black Sea port of Novorossiisk via the Tengiz-Black Sea pipeline that stretches over 1,500 km. The barrels would then sail through numerous maritime routes including the Black Sea, the Mediterranean, the Suez Canal, the Red Sea, the Indian Ocean and the South China Sea before reaching South Korean ports.
CPC Blend is a light sweet grade produced in western Kazakhstan with a specific gravity of around 44-45 API and a sulfur content of 0.5%-0.6%.
South Korea's SK Innovation, GS Caltex and Hyundai Oilbank are among Asia's regular buyers of CPC Blend crude. The country imported 19 million barrels of the light sweet crude in 2020, accounting for around 2% of its total refinery feedstock purchases in the year, according to data from state-run Korea National Oil Corp.
"We have plenty of stockpiles of both crude and refined products. It won't be necessary for the refiners to adjust crude throughput because of the latest Suez Canal incident," another South Korean refinery official said.
Mediterranean crude out of favorAsian refiners have been steadily cutting back on light sweet Mediterranean crude procurement since late third quarter of 2020 as the uptrend in the Brent-Dubai crude price spread and fragile transportation fuel demand across Asia dampened the companies' appetite for middle distillate-rich grades.
Over the past several months, Taiwan's CPC Corp. Indonesia's Pertamina and Thailand's PTT have been less active in spot tender purchases of Azeri Light crude than in previous years, according to recent tender results reviewed by Platts.
"Mediterranean grades can be quite costly in terms of logistics, while transportation fuel demand destruction since the outbreak of the pandemic, especially for diesel and jet fuel, drastically reduced light sweet crude feedstock requirements," a feedstock procurement strategist at Pertamina said.
The Brent-Dubai Exchange of Futures for Swaps spread -- a key indicator of Brent's premium to the Middle Eastern benchmark that often serves as a barometer of general strength in the international sweet crude complex -- averaged $1.81/b to date in Q1 2021, compared to an average of 84 cents/b in Q4 2020 and 33 cents/b in Q3 2020, Platts data showed.
A stronger EFS makes various sweet crude grades produced in the North Sea, Africa, Central Asia and the Mediterranean that are linked to the European benchmark Brent less economical than Dubai-linked high sulfur Persian Gulf grades.
"The higher EFS means that it's better off buying light sweet crude from the US," a feedstock trading manager at a Taiwanese refiner said, indicating that Asian refiners typically purchase spot US crude cargoes on a Dubai pricing basis.
