October 18, 2013 / 6:00 PM / 4 years ago

Latam oil producers look to Asia for sales amid U.S. refinery maintenance

HOUSTON, Oct 18 (Reuters) - Latin American crude exporters are sending more oil to Asia after ramping up tenders to get rid of stocks that have swollen on refinery maintenance this quarter in the Americas.

At least six companies have sold their South American output via tenders for more than 20 cargoes in recent weeks as refineries in the region cut their normal purchases due to seasonal autumn turnarounds.

Canada’s Pacific Rubiales, Colombia’s Ecopetrol , Ecuador’s Petroecuador and Argentina’s Pluspetrol and Pan American Energy have gone to the open market since September to sell large volumes of crudes.

They will be delivered in November and December to a widening number of Asian companies, along with typical U.S. buyers, according to traders.

“Most Latin American producers are long crude right now because in November the global refining system will have almost 8 million barrels per day out of service, in comparison to an average outages of 1.5 million barrels per day,” an oil company trading executive who works in Colombia told Reuters.

In the United States, crude oil input at refineries had already declined to 14.98 million barrels per day (bpd) in the first week of October, 1 million bpd less than the previous month, according to the Energy Information Administration (EIA).

Even without the seasonal work, U.S. imports of Latin American crude have been in decline, displaced by rising domestic shale supplies and imports from neighboring Canada.

In the first seven months of 2013, supplies of Latin American crude to the United States fell 14.2 percent compared with 2012, the EIA added, and preliminary figures for September from August show further declines for imports of Colombian, Mexican and Brazilian crudes.

The trend is expected to continue at least for another month, with several South American producers being forced to sell their crude to traders who will ultimately steer it to China or India, where demand is rising.

Indian refiners have increased purchases of Latin American crudes, which will make up 13 percent of Indian oil imports in October, up from 10 percent the previous month, according official figures and projections by Thomson Reuters.

Latin American crudes will also increase to 5 percent of Chinese takes in October, up from 3 percent in September, while the country brings online 1 million barrels per day of additional throughput capacity in the last quarter of this year, the data showed.

Latin American state-owned oil companies normally sell via long-term supply contracts, after dedicating most production to local refineries. When they do hold occasional tenders, they prefer to deal directly with U.S. refiners as they offer faster deliveries and better prices.

Sellers of medium crudes with low sulfur content, such as Colombia and Ecuador, did get bids in the recent tenders from U.S. buyers, but at wider discounts to Brent, compared with September.


Some trading firms that bought cargoes of Latin American crudes are filling large tankers to China, increasing the volume that Asia already takes from countries such as Ecuador and Venezuela, both of which pay their debts with oil.

The trading firm Trafigura bought at least three cargoes of Vasconia crude in recent weeks, trying to fill a Suezmax or a VLCC (very large crude carrier) with up to 2 million barrels for the state-run Petrochina, two traders close to the deal told Reuters.

China surpassed the United States last month as the world’s biggest petroleum importer and its demand is expected to keep growing in the coming years and its consumption to double. China’s bill will grow to some $500 billion for imported oil by 2020, according to analytical firms.

Indian companies such as Reliance and state-run India Oil Corporation (IOC) are increasingly looking to buy crudes from Brazil, Colombia and Venezuela after Western sanctions cut their supplies from Iran.

Reliance will receive in November the single largest shipment from Brazil since January and IOC received a trial cargo of Colombia’s Castilla and Vasconia grades from Ecopetrol.

With a troubled and aged refining network, Latin American producers cannot always rely on directing their output to regional refineries.

Valero’s Aruba refinery and Hess’s Hovensa in the Caribbean were closed in 2012, taking away 730,000 bpd, while PDVSA’s 335,000 bpd refinery in Curacao is operating at half capacity.

Costa Rica’s Recope and Dominican Republic’s Refidomsa launched large tenders this month to import fuels because of planned maintenance and lack of capacity to supply the entire domestic needs..

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