Asian refiners view US crude premium as cost of stable supply, logistics security

East Asia continues to rely heavily on US crude as a leading non-Middle Eastern supply source amid efforts to diversify procurement, with double-digit premiums for WTI Midland and West Texas Light delivered into Asia potentially reflecting the value of enhanced supply reliability and logistical security, according to industry sources and government ministries.

For Thailand, Japan, South Korea and Taiwan, US crude has been the leading and most reliable non-Middle Eastern supply option, feedstock managers at Japanese, South Korean, Taiwanese and Thai refiners in Negishi, Ulsan, Xiaogang and Rayong, as well as Singapore-based traders, told Platts, part of S&P Global Energy, during Oct. 22-27.

Refiners’ trading teams have struggled to secure better spot-market offers, with WTI Midland premiums consistently exceeding $10/b since the start of the second quarter; however, given the irregular availability of medium and heavy sour crude from the Middle East, elevated Persian Gulf-Far East freight and insurance costs, and heightened shipping security risks, the premium for US crude may reflect the value of more reliable delivery and supply, the Japanese, South Korean, Taiwanese and Thai refinery feedstock managers said.

Platts assessed WTI Midland on a DES Yeosu basis at a premium of $34.60/b to front-month Dubai on Sept. 18, marking a record-high price differential for the light, sweet US crude delivered to the Far East. The premium was last assessed at $26.30/b on Oct. 26.

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