US oil exports to Asia set to rise in Q2 as freight costs fall

SINGAPORE/NEW YORK, Jan 09 (Reuters): US crude oil exports to Asia are set to rise in the second quarter as sellers cut prices following sharp drops in freight rates and expected weaker demand in the United States, trading and shipping sources said.

Offers for US crude arriving in Asia in the second-half of March or April are about 50 cents a barrel lower than a month earlier, they said, making it more competitive against oil from the Middle East.

US crude grades popular with Asian buyers include light oils such as West Texas Intermediate (WTI) Midland and Eagle Ford, as well as Mars and Southern Green Canyon among heavier grades.

The United States has boosted crude sales to Asia, helped by a steep discount for US oil to the global benchmark Brent. CL-LCO1=R

"There is the potential for Q2 US crude exports to Asia to be higher year-on-year if the WTI/Brent spread remains in the range it has in recent months and with the lower freight rates," said David Arno, oil analyst at analytics firm Genscape.

"There are a few variables, though, with the ongoing U.S-China trade war and the potential for the waivers for Iranian crude exports to Asian countries to not be extended."

A US decision not to extend waivers allowing some Asian countries to import Iranian oil despite sanctions would boost demand from South Korea, Taiwan, Japan, China, and India.

The rate for chartering a Very Large Crude Carrier, to ship 2 million barrels of oil from the Louisiana Offshore Oil Port (LOOP) in Houston to Singapore has fallen more than 40 per cent from late-October to about $5 million, data on Refinitiv's Eikon shows. TD-LPP-SIN

VLCC prices spiked late last year during the winter season and as buyers boosted imports ahead of renewed Iran sanctions.

Enquiries for ships to send oil from the US Gulf coast or South America to Asia have picked up, while West Texas Intermediate (WTI) at Houston - also known as MEH - and Mars are seeing strong demand from Asia, US-based trade sources said.

Companies looking for ships include P66, Mercuria, Reliance and Vitol while Royal Dutch Shell has a VLCC on the way to Asia, said one source.