The dispute between US and Middle Eastern oil producers has sprung up a notch as American crude makes its way right to the center of Asia, the world’s most-prized energy market.
Royal Dutch Shell Plc has provided a cargo of US West Texas Intermediate Midland crude that’s priced off the Dubai benchmark in its appearance throughout Asian hours on S&P Global Platts’ widely-referenced trading platform, according to two merchants and data collated by Bloomberg.
Offering the cargo — scheduled to be delivered to Singapore, or Linggi or Nipah in Malaysia — in opposition to the Middle East’s oil benchmark brings it into direct competitors with Gulf grades that are produced in Saudi Arabia, Abu Dhabi and Qatar. The circulation of US oil to Asia once thought of a one-off arbitrage, has expanded in recent years into more regular shipments.
While US shipments of grades such as Eagleford and WTI Midland are usually priced off the American benchmark WTI, Shell’s supply makes it simpler for buyers to check it against same quality oil that refiners across South Korea, Japan, and China usually take. The crude could be transferred to different vessels in the Malacca Strait near Singapore, making the logistics easier for buyers across Asia.
American exports have corroded the dominance of Middle Eastern crude in Asia, at a time when the Organization of Petroleum Exporting Nations and its associates are forbidding their output to prop up prices. South Korean oil imports from the US rose to about 8.5 MMbbl in June, in contrast with 3 MMbbl a year earlier. American shipments to Asia are likely to expand further due to the beginning up of two Permian pipelines this year.