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Asian crudes find

support from demand

in the west

SINGAPORE: Recent surges of crude prices in the United States have opened opportunities for traders to move cheaper Asian crudes to the US and possibly cushion a seasonal slump in regional prices, oil traders said.

"The arbitrage window to move crude oil from Asia to the US is now open," an oil trader with a Wall-Street firm told Reuters on Wednesday.

"If cargoes are eventually moved there, it will definitely cushion any drop in prices as we head towards the sluggish second-quarter when refiners are undergoing their maintenance."

The arbitrage refers to a price difference which allows the purchase of Asian crudes because they are cheaper than U.S. crudes even with the added cost related to transport.

According to a U.S. refiner, "This arbitrage opportunity would be enhanced if West Texas Intermediate (WTI) prices rise further towards $23.00 per barrel."

On Tuesday, the most-traded May contract of WTI on the New York Mercantile Exchange (NYMEX) closed at $22.70 per barrel, up 44 cents from the day-earlier close.

Prices in the U.S. rose during the past month as oil inventories fell to a 19-year low following a colder than expected winter. The country is now facing a seasonal rise in demand heading into the spring season.

At least two trading houses have considered delivering Malaysian distillate-rich Tapis crude to either the US west coast or US Gulf coast, two refining centres. Another trader had offered a cargo of Malaysian Bintulu crude to the US Gulf coast.

Only a cargo of mid-April lifting Australian Cossack has been confirmed as traded into the US Gulf Coast. Traders said the cargo could not find a buyer in Asia.

Traders added it was currently possible to sell even Middle East Oman crude to the U.S.

"The WTI/Oman price spread is now around $4.30 per barrel. With freight for a VLCC (1.8 million barrels) at $1 or less, it would be economical to move Oman to the States," a trader with a U.S. refiner in Singapore said.

About three million barrels of May lifting Oman have been sold to the U.S. so far.

While buyers' targets for a one million barrel cargo of Tapis, for lifting late in April, were at $20.50 per barrel, offers were firm at $21.00 or at WTI less $1.00-to-$1.25 per barrel.

Freight for a million barrel cargo from Asia to the US is estimated at $1.30 to $1.60 per barrel.

Chile's state oil firm Empresa Nacional de Petroleo's tender to buy 960,000 barrels of crude oil for May 25-29 delivery provided another western outlet for Asian crudes. The tender closed on Wednesday.

Sources said Malaysia's state oil firm, Petronas, was participating indirectly in the tender, offering crude oil on the equivalent price of $21.00 fob.

According to Malaysian sources, the last time a cargo of Tapis crude was ever sold into the U.S. was in 1994 by a European refiner.

Regional enquiries for May lifting distillate-rich crudes have fallen notably from Japan. However, pockets of demand were still evident from endusers in Singapore, Thailand, Myanmar and potentially South Korea and Indonesia.

Several of the regions refineries are scheduled to shut down in the second quarter to carry out maintenance work, which normally depresses the price of Asian crudes.-Reuter