Crude oil from the North Sea is flowing to Asia at record rates, set to reach 12 million barrels this month, Bloomberg reports, citing shipping data. Tankers carrying 9 million barrels are already on their way to Asian refiners and another 3 million barrels are to be loaded this week.
North Sea producers have been struggling with falling yields due to field depletion and lack of capital for investments in new deposits because of the price crash, in addition to a mini-glut of 12 million barrels of crude accumulated since the start of the price crash. The glut was relieved late last year thanks again to Asian refiners.
The increased demand for North Sea oil from Asia comes on the back of the OPEC production cut agreement that saw many Middle Eastern producers slash their exports in proportion with output cuts. This curb in Middle Eastern supply has made the more expensive North Sea blends inevitably more appealing, hence the record loadings.
These developments, although certainly good for North Sea energy firms, raise the question how long it will take Middle Eastern producers to recapture the market share they will certainly lose over the next five months, until the production cut agreement is in force.
If Chinese demand for oil continues to rise as predicted, to 12 million bpd, this year the hunger for alternative supplies will persist, allowing more players to replace Middle Eastern producers that supply Asian markets. Once there, they are unlikely to go quietly once the Middle East states return.
This prospect could turn the next five months into a nervous game and reduce the willingness of the signatories to the agreement to keep their end of the bargain, despite the recently announced setting up of a monitoring committee to ensure compliance.
By Irina Slav
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