Oman to Export Oil to US

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. 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 US$2.75 a barrel on 4 August 2010, 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 US$1.60 a barrel, after hovering around US$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 US$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.- Gulf News