Opec cuts make North Sea oil most alluring in Asia for 7 yrs
LONDON — Atlantic Basin oil producers are nibbling away at Opec’s prized market share in Asia thanks to the most competitive crude prices in seven years. The exporter club’s output cuts are partly to blame.
Brent, a global benchmark, closed at a premium of just 57 cents a barrel to Dubai crude on Monday, the greatest incentive to move North Sea oil east since June 2010, data from PVM Oil Associates in London show. It was at about $2.50 at the end of November, when the Organisation of Petroleum Exporting Countries said it would cut output. North Sea flows to Asia doubled this year from the same period in 2016.
Supply of heavy grades, dominating much of the output of Saudi Arabia and neighbouring countries, has diminished since Opec and allied nations started cutting output from January 1. While Middle East flows have fallen, stockpiles have proved harder to shift in other producing regions, including the North Sea, where rising loading programmes offer a sign that output is gaining. Global inventories rose in the first quarter, despite the supply cuts, according to the International Energy Agency.
Brent crude was up 8 cents at $51.68 a barrel by 0940GMT on Tuesday, while US crude futures were up 10 cents at $49.33 a barrel.
“Crude is trading like a game of musical chairs,” said Richard Fullarton, founder of London-based commodity hedge fund, Matilda Capital Management. “If Opec extends cuts then more Brent and WTI will head to the east” which in turn will drive up shipping costs.
Oil prices had their biggest weekly drop since early March last week, as accelerating US supply weighed on prices. The weakness is in evidence in Europe, where the key North Sea market is still showing signs of excess.