Near-record U.S. oil prices are attracting crude cargoes from the North Sea as companies look to profit from the difference between futures contracts traded in New York and London. BP Plc is among oil companies seeking to take advantage of a so-called "arbitrage," where it's profitable to buy oil in one region and sell it in another because the difference in prices exceeds the cost of shipping. BP will ship a 2 million- barrel cargo from the North Sea to the Gulf of Mexico on Nov. 23, according to Paris-based shipbrokers Barry Rogliano Salles.
The West Texas Intermediate December futures contract on the New York Mercantile Exchange traded at a premium of $3.61 a barrel to December Brent on the London-based ICE Futures Europe exchange at 9:47 a.m. London time. The premium has averaged $3.52 a barrel for the last 30 days. Over the last year, the spread has been at an average discount of 58 cents. The "wide spread shows that exports from the North Sea and West Africa to the U.S. Gulf Coast have become more viable and economic," Ehsan Ul-Haq, head of research at PVM Oil Associates GmbH in Vienna, Austria, said in an e-mail. "Crude is worth more on the U.S. Gulf Coast." U.S. crude prices have gained 56 percent this year, hitting a record high of $96.24 a barrel on Nov. 1 on concerns global demand will exceed supply this winter and political tension in the Middle East will disrupt supplies. Falling stockpiles at Cushing, Oklahoma, the delivery point for Nymex contracts, and a drop in imports from Canada, have caused WTI to strengthen relative to Brent, according to Ul-Haq. Brent last traded at a premium to WTI on Aug. 23. North Sea crude grades such as Forties, which is linked to the price of Brent, compete with U.S. crude including Light Louisiana Sweet, linked to WTI, because they are of similar quality. The U.S. rarely buys spot crude cargoes from Europe because of the expense of shipping the oil across Atlantic typically cancels out any profit. U.S. crude imports from the U.K. amounted to 130,000 barrels a day in 2006 according to Energy Information Administration data, about 1 percent of total imports. The last very large crude carrier, or VLCC, hired to ship oil from the U.K. to the U.S. Gulf Coast was in May, according to voyages tracked by Bloomberg data. A VLCC has the capacity to carry about 2 million barrels of oil. A trader would make a profit of about $2.03 a barrel selling a VLCC of November-loading Forties crude for delivery in the U.S. Gulf Coast in December, including freight costs, according to calculations based on Bloomberg data as of Nov. 5.
The cost of shipping crude from the U.K. to the Gulf Coast in a VLCC is $1.32 a barrel according to Bloomberg data. The average for the year to date is $1.22 a barrel.
|
