China surpasses Canada as top U.S. crude buyer amid record sales

By Catherine Traywick and Sheela Tobben on 4/4/2017

WASHINGTON (Bloomberg) -- China became the biggest buyer of U.S. crude in February, surpassing Canada, at a time when OPEC is cutting back output.

China imported 8.08 MMbbl of U.S. light sweet crude, nearly quadrupling its January purchases, according to data released by the U.S. Census Bureau Tuesday. U.S. crude shipments totaled 31.2 MMbbl, reaching the highest level on record. Canada, the U.S.’s largest trade partner, imported 6.84 MMbbl, down 20% from a month earlier.

The surge in U.S. shipments comes as the Organization of Petroleum Exporting Countries trims output in an effort to end a glut that battered the economies of global energy exporters. U.S. crude stockpiles climbed to 534 MMbbl in the latest government data, the highest level going back to 1982. In March, crude prices slumped the most since July amid concerns about global stockpiles.

“The U.S. is a larger exporter of crude than many OPEC countries,” John Auers, executive V.P. at energy consultant Turner Mason & Co. in Dallas, said by phone. “That China is buying more means that the U.S. has become a larger player in the global crude export market.”

U.S. crude exports in February jumped 35% from a month earlier, according to the U.S. Energy Information Administration. While shipments are expected stay above 2016 levels, the boost was likely aided by seasonal maintenance at U.S. Gulf refineries, according to Auers. Also, the production cuts made by OPEC countries made Dubai, an Asian benchmark, more expensive compared to the U.S. counterpart.

This year, West Texas Intermediate has averaged 49 cents below Dubai crude, a lower-quality grade, based on front-month  swaps data from broker PVM Oil Associates Ltd.

"A very strong WTI-Dubai spread enabled opening in arbitrage opportunities to Asia at a time when there were lots of turnarounds going on in the U.S. Gulf in February," Dominic Haywood, a London-based analyst for Energy Aspects Ltd. said in a phone interview.

Singapore imported 2.03 MMbbl from the U.S., while countries including Curacao, Italy, Japan, South Korea and the Netherlands bought in excess of 1 MMbbl each, government data show. They include condensate derived from natural gas.

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