In the LOOP: Crude oil export cargoes from Louisiana to China dry up

September was the second month of halted US crude exports from Louisiana to China due to higher VLCC freight rates, a narrower Dubai/LOOP Sour spread and uncertainty over possible trade tariffs imposed by China on US crude.

In September, no cargoes departed Louisiana for China, according to cFlow, S&P Global Platts trade-flow software. Additionally, no cargoes left Louisiana for China in August, according to export data from S&P Global Platts Analytics and US Customs.

Rising VLCC freight rates from the US Gulf Coast to China may have contributed to the lack of cargoes flowing that way. Average VLCC rates for October to date reached $3.39/b, up from an average rate of $2.45/b in September and $2.37/b in August, according to Platts data. In contrast, VLCC freight rates from the USGC to Singapore have also increased in recent months, but have not hit the high levels of the China route. Average VLCC rates for October to date on the Singapore route reached $2.91/b, up from an average rate of $1.98/b in September and $1.89/b in August.

Freight rates for VLCCs carrying cargoes from the USGC and Caribbean have soared over the past two weeks on a combination of increased interest from Asian crude buyers and a very tight global VLCC market. Rates have climbed over 43%, or $1.9 million, for the USGC-Singapore route since September 27, the day before rates climbed $800,000 in one trading session.

A narrower Dubai/LOOP Sour spread has made exports to Asia in general less competitive in recent months. For October to date, Dubai's premium to LOOP Sour fell to $2.29/b, a decrease of 21 cents/b month on month and a decline of $1.02/b from August.

In August, only one cargo bound for South Korea, one for Japan and two for India departed Louisiana, according to data from Platts Analytics and US Customs. September data from cFlow showed only one cargo headed to Asia. The Australian Spirit, bound for Ulsan, South Korea, departed Louisiana September 13, with delivery scheduled for October 28.

US crude oil exports have bounced back in recent weeks, after reaching a five-month low of 1.31 million b/d at the end of June, according to data from the US Energy Information Administration. Crude exports reached 2.576 million b/d for the week ended October 5, representing a week-on-week increase of 853,000 b/d.