(Bloomberg) -- A cargo of North Sea crude that’s crucial to setting the world’s most important oil benchmark fetched a very low price in Asia, a sign that buying remains lackluster.
A supertanker-sized cargo of Forties sold last week at a price that works out at $3.50 to $4 a barrel below the North Sea spot price, once freight is taken into account, according to traders familiar with the matter. It was purchased by the South Korean oil refiner GS Caltex Corp., they said.
Asian demand plays a big role for North Sea grades that help to define Dated Brent, the world’s key physical crude price. Flows to the region can account for as much as 13% of exports of North Sea crudes — or as little as zero.
In recent months, Asian buyers have shunned North Sea oil due to weaker demand and as they opted for cheaper supplies from places like the Middle East and US. That has coincided with muted purchases in Europe, where refineries have enough feedstock to cover near-term needs.
While cargoes are normally sold to buyers weeks ahead of loading, this shipment wasn’t sold until the last minute. That, and the knock-down price GS Caltex paid, highlight the tough trading environment for the barrels.
The cargo of roughly 2 million barrels is now being loaded onto supertanker C. Spirit from a UK terminal, ship-tracking data on Bloomberg show. It was at one stage owned by Gunvor Group, before passing through other traders and ultimately being bought by GS Caltex, according to traders. It’s not known what the prices were during those steps.
GS Caltex bought the cargo at a premium of about $2.50 a barrel to the Dubai benchmark — a level cheaper than Abu Dhabi’s Murban, a popular grade in Asia.
Gunvor and trading giant Trafigura Group last month bid heavily for crudes that define the Dated Brent marker. The bull play lasted for less than two weeks, but rippled through the global market. The two companies amassed a large amount of benchmark oil — most of it the US’s WTI Midland. Gunvor at one point retained at least 17.5 million benchmark barrels, data compiled by Bloomberg show.
With those supplies needing to find buyers, another supertanker — the Baltic Loyalty — took 2 million barrels of Forties from three smaller tankers in late June and early July, according to ship-tracking data. Two of the three tankers were hired by Gunvor and had been floating at sea for more than two months prior to the switches.
The supertanker, which would normally engage in voyages lasting thousands of miles, instead idled off the UK coast for two weeks. It then discharged a part of its load at Rotterdam, an extraordinarily short journey for such a large vessel, before heading back out to sea.
Gunvor declined to comment.
--With assistance from Serene Cheong.
(Updates with Gunvor response)
©2024 Bloomberg L.P.
