Asia crude market boosted by Bass Strait shut in
By Azlin Ahmad
SINGAPORE, Oct 1 (Reuters) - A shutdown in Australia's Bass Strait oil and gas field has
provided the Asian crude market with a much needed boost, traders said on Thursday.
Shell Australia (quote from Yahoo! UK & Ireland: SHEL.L) and Mobil Refining Australia (NYSE:MOB - news) refineries have
been buying prompt crude cargoes to cover for the loss of feedstock from the 200,000 barrels-per-day (bpd) Bass Strait
field.
The price of benchmark Tapis, off which most Australian grades are prices, has risen sharply this week owing to the sudden
prompt demand.
And some traders said prices will remain bouyant because there were now few cargoes available to Shell and Mobil to cover
any potential needs in the next two weeks or so.
Traders said that since Friday, at least one October loading 450,000-barrel cargo of light sweet Malaysian Tapis and three
October and November cargoes of Cossack had been sold in total to the two refiners.
They said that up to 500,000 barrels of October Minas had also been sold to Shell's 435,000-bpd refinery in Singapore, to
replace cargoes diverted to Australia.
Shell declined to confirm the trades and Mobil was unavailable for immediate comment.
''The market has definitely been supported on the back of Bass Strait, but it all hangs on how long the shutdown will last,'' one
trader in Australia said.
On Friday, Bass Strait operator Esso Australia, a unit of Exxon Corp (NYSE:XON - news)N> announced a shutdown at the
Bass Strait field, following a blast at a gas processing plant in Victoria.
The field produces about 40 percent of Australian crude output and most oil production is piped directly to Shell's
110,000-bpd Geelong refinery and Mobil's 130,000 bpd Altona complex.
Exxon said on Tuesday it aimed to bring the gas production back up by the end of next week. The company said previously
that it would resume crude production only after gas production had restarted.
The incremental demand that emerged following the shutdown pushed prices of Asian crudes higher.
The Tapis cargo was sold at parity to its Asian Petroleum Price Index (APPI), compared to an offer on the cargo in the
previous week of APPI minus 20 cents.
In September, Tapis was discussed at APPI minus 50 cents.
Tapis sellers are now seeking a premium of 20-25 cents over APPI for their November cargoes.
The Cossack cargoes sold were at Tapis APPI minus 60 cents per barrel, firmer than a trade done early last week of APPI
minus 75 cents.
Traders said the shutdown would mean Shell and Mobil would need to divert crudes it already had in hand to Geelong and
Altona from refineries elsewhere in Asia.
''The problem for them is getting crude for immediate processing, as in now to the next 15 days,'' said a trader in Australia.
''There is not enough crude out there to cover the very short-term, so all they can do is to optimise what they already have,''
he said.
Neither Shell or Mobil's refineries have large storage capacity because most of their crude is received by pipeline, traders said.
The Shell and Mobil refineries elsewhere in Asia that are diverting crude to Australia were likely to need to cover their own
shortfall by buying further out, adding another layer of demand to the Asian market, traders said.
Traders said that difficulties in rearranging deliveries to meet the two refineries' very prompt requirements could lead to run cuts
in the very short-term period.
But a spokesman at Shell Geelong told Reuters that it had adequate supplies, so it was unlikely to cut runs in the next fortnight.
''We are comfortable in the next two weeks, we don't see any problems,'' he said.
''We have our Sydney refineries, we have diverted some prompt and we're quite happy with the supply situation at the
moment,'' he said
Mobil said on Monday it was diverting a cargo of Griffin crude from its Adelaide refinery to Altona.
A Mobil spokesman also said runs at Altona would be reduced following a reformer maintenance scheduled to start next
Saturday. |
