Singapore — Various Northeast Asian end-users are bracing themselves for possible lengthy delays in the delivery of North and Central American crude oil supply amid recent onslaught of Hurricane Harvey, with three South Korean refiners expecting to receive cargoes from the US and Mexico behind their initial September schedule, market sources said Tuesday.
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At least two South Korean and one Chinese refiners had fixed a few Suezmax and VLCC cargoes to co-load their Mexican term barrels with Eagle Ford crude for delivery in the second half of September. But the companies are now expecting delays of around one to two weeks for the barrels to reach Asia, a North Asian crude trading manager with knowledge of the matter told S&P Global Platts.
"South Korean companies have lots [of logistics matters] to sort out now ... for what we know as of now, the delays could be as short as one week to as long as a couple of weeks," the trade source said.
Related factbox: Refineries now facing brunt of Harvey-related flooding
Meanwhile, one South Korean refiner said it had not purchased any US crude barrels for loading in late August and September, though the firm is also expecting around one week of delay in the delivery of its September Mexican term supplies which include Isthmus and Maya crude.
"I saw last week a string of loading schedule delays for [September] Mexican [term] barrels [bound for Asian customers] ... most of them were initially booked for co-loading with US crude [bought by various Northeast Asian companies]," the source said.
Hurricane Harvey's remnants continued to pound Houston and the US Gulf Coast on Monday with overwhelming rain and bursts of wind.
Overall, numerous tornado warnings and the prospect that massive flooding in virtually every corner of the nation's fourth-largest city could last at least several more days -- exacerbated by two swollen reservoirs that were being slowly released to avoid an even greater catastrophe -- complicated workers' efforts to assess damage to key energy infrastructure and determine when operations can return to normal.
ALTERNATIVE CRUDE, CONDENSATE EYED
Regional sweet and sour crude traders noted that some of the Asian refining companies affected by the delays in their US crude and condensate delivery may venture into the regional spot market for alternatives, as lengthy delays could possibly lead to cancellation of their initial purchase agreements.
"Not all companies [that had bought August and September Eagle Ford and Mexican crude] would be able to tolerate long delays ... some contracts are possibly bound for cancellation," a Northeast Asian condensate trader said.
With some prompt-month cargoes of ultra-light crude grades available in the Middle East and Oceania, some Asian end-users could approach regional condensate suppliers in search of alternative barrels to replace US grades.
Last week, market talk in Asia indicated that an unknown quantity of Iranian South Pars condensate was available for sale in the spot market. Several Northeast Asian trade sources said the Iranian ultra-light crude was possibly offered from one of the storage units in China.
Regional traders also noted that some Australian ultra-light grades including North West Shelf and Pluto condensate might be readily available, although the spare volume for near-term loading may be small.
"Of course there are [condensate] storage facilities in Dampier [Western Australia] but normally they don't keep a lot in there ... if desperate enough, you'd still consider buying it though," said one Northeast Asian sweet crude trader.
Traders said the best possible bet for any refiners keen to buy regional ultra-light grades to replace September Eagle Ford supply could be Qatar's deodorized field condensate and low sulfur condensate.
Market sources said Qatar Petroleum for the Sale of Petroleum Products, or QPSPP, had been regularly offering prompt-month DFC and LSC cargoes over the past few trading cycle.
Meanwhile, a cargo of Indonesian Senipah condensate was recently heard to be on offer by an oil major for early October loading. In the last cycle, Total was heard to have sold a 400,000-barrel clip of the condensate to BP. The cargo, scheduled for September 18-28 loading, was heard sold at a premium in the low- to mid-$2s/b to Dated Brent crude.
"Regional condensate premiums may be high but refiners wouldn't mind paying up even more because the strong gasoline margins [stemming from US refinery shutdowns amid hurricane] would easily compensate," said a Singapore-based condensate trader.
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