Singapore: Two Very Large Crude Carriers (VLCCs), or some four million barrels of Oman crude are set to make a rare move to the US west coast after the arbitrage window was opened over the past few weeks, trade sources said yesterday.
One VLCC of Oman for August loading will be shipped by Mercuria and the other for September loading is set to be moved by oil major Shell, capitalising on the wide spread between markers for Western sweet crudes versus sour Middle East benchmark Dubai crude, traders said.
Both Shell and Mercuria declined to comment.
Front-month Brent/Dubai Exchange of Futures for Swaps (EFS) for September jumped to $2.75 (Dh10.09) a barrel on August 4, the highest since December 2008 when OPEC producers began record supply curbs, making Dubai-linked crude more attractive.
But the arbitrage window is now closed as the EFS for October fell to $1.60 a barrel yesterday, after hovering around $2.00 for the past week.
Mercuria bought the prompt August-loading Oman from Japanese trader Itochu, which had earlier bought the cargo from Taiwan's Formosa Petrochemical, traders said.
Earlier this month, Formosa sold one VLCC, or 2 million barrels, of Oman crude in the spot market after a blast forced it to shut its refinery in late July.
Oman value had been depressed over the past month, falling to a discount as deep as $1.60 a barrel to Dubai quotes in late July, due to increasing competition from Russian ESPO crude and weak Asian demand after recent port and refinery accidents forced the diversions of tankers and deferment of crude deliveries.
Reflecting the weak sentiment in the Middle East market, the Dubai August/September intermonth spread widened to a discount between 85 and 90 cents since early August, its steepest contango in 1- year, Reuters data show.
Traders were hoping for improving demand sentiment after Gulf countries cut their official selling prices (OSPs) to Asia.
Construction: new agreement
The Omani government has signed an agreement with the Export-Import Bank of China, or China Eximbank, to finance the construction of four giant carriers for state-owned Oman Shipping Co, or OSC, Muscat-based Al Watan daily reported yesterday.
Under the agreement, China Eximbank will fund the construction of the vessels which will have a capacity of 400,000 tons and which will carry iron ore pellets from Brazil to the factory of the Brazilian mining firm Vale in Sohar Industrial Estate in Oman's Sohar province, the newspaper reports.
The four carriers are being constructed by China's Jiangsu Rongsheng Heavy Industries Group Co Two of them are expected to be delivered by the end of next year and the other two in 2012, Ahmed Macki, Oman's national economy minister, and deputy chairman of the financial affairs and energy resources council, said according to the daily.
The carriers are chartered to Vale under a long-term deal, Macki, who is also OSC's chairman, told Oman News Agency, the paper reports.
