* First spot North Sea cargoes sent to U.S. since January
booked this week
* West African imports to U.S. up around 50 percent since
January - traders, analysts
* Increase unlikely to be sustained, but more volatility in
By Simon Falush and Selam Gebrekidan
LONDON/NEW YORK, March 14 U.S. imports of West
African and European crude are recovering once again after
shifting arbitrage economics made these shipments cheaper than
railed Bakken oil from North Dakota.
This week, BP booked a cargo of Norwegian crude oil to be
shipped to Philadelphia later in March, while another vessel of
North Sea crude oil was booked by Total to go to the Caribbean.
This was the first time since January that any spot North
Sea cargoes have been booked to move to the United States other
than for term deals, traders said.
Traders have reported a pick up in West African crude oil
cargoes to the United States which the U.S. Energy Information
Administration (EIA) data showed had ground almost to a halt
Preliminary import data from the U.S. EIA show three
suezmax-sized cargoes arrived from Nigeria in late February and
early March and another from Angola in late February.
While sporadic shipments have arrived from both countries
over the last few months, a steady if small stream has
established itself since February.
Four-week average imports from Nigeria alone stood at
110,000 barrels-per-day last week, the highest level this year,
according to EIA data.
Market sources and analysts say there is around 50 percent
more oil per month travelling across the Atlantic in late
February and March compared to January and late last year.
For years, a surge in U.S. domestic oil production and the
cheap cost of shipping Bakken crude oil to the East Coast via
rail cars had dried up imports from across the Atlantic.
Indeed, Nigerian imports to the United States stood at
93,000 bpd in November, the lowest level since February 1983.
They recovered only slightly in December to 99,000 bpd.
They reached a peak of 1.4 million bpd in 1979 and were
above 1 million bpd for much of the 2000s.
This slump had been encouraged by a growing premium of
European crudes to oil originating in North America.
However, Brent crude's premium to U.S. crude
dipped to its lowest since October earlier in March to below
$5.50, though it has since recovered.
European and West African grades of crude oil are
benchmarked against Brent.
Louisiana Light Sweet and Bakken crude have
become less competitive against Brent crude due to increased
Differentials for Bakken shale oil for delivery at
Clearbrook, Minnesota, were much stronger for most of this year
after it became clear weather was going to severely affect
"Bakken might not have been very attractive to U.S. Atlantic
Coast refiners due to price considerations," said David Wech,
analyst at JBC Energy in Vienna.
"But (this is) possibly also based on reduced availability
following disappointing production levels due to harsh winter
weather and logistical hiccups in line with rail safety issues.
"West African crude would be the natural replacement."
December output from the Bakken and Three Forks shales in
North Dakota fell by nearly 50,000 bpd from a record high over
910,000 bpd in November, as a series of snow storms and wind
chills cut into production.
Output was nearly unchanged at just over 870,000 bpd in
January, according to the latest reports from North Dakota
regulators. [ID: nL2N0MA1SY]
Differentials went from as low as $15.50 under U.S. crude
futures in early November to $2.50 under in early January as
output fell, although this strength has eased for barrels due to
be sent in April.
On Thursday, North Dakota Sweet (Bakken) oil for April
delivery at Clearbrook traded at $6.00 a barrel under the
front-month U.S. oil futures contract.
Meanwhile, it costs somewhere between $14 and $17 a barrel
to get that oil from the northern Midwest state to refiners
along the U.S. East coast, according to a recent report
published by Valero Energy. That compares with
previously published estimates from Tesoro Corp that
pegged the cost at $9 to $10 a barrel.
In fact, refiners may soon see these costs rise after a
series of accidents involving light sweet Bakken oil brought
intense regulatory scrutiny to the practice of shipping oil by
Many analysts expect new safety measures to add to the cost
of transporting Bakken to the East Coast aboard freight trains.
Market participants think it very unlikely that there will
be a sustained shift to a significant arbitrage for cargoes to
head west across the Atlantic, but there will likely be more
volatility in flows, as transport economics shift said Olivier
Jakob at Petromatrix in Zug, Switzerland.
"There have been big changes in transport capacity, and
there will be more swings as transport economics change," he
One factor which could close the arbitrage window would be a
sustained release of the Strategic Petroleum Reserve, which
would put pressure on the price of U.S. crude relative to Brent.
Indications that this may happen came from the fact that the
United States launched its first test sale of crude from its
emergency oil stockpile since 1990.
"A brief recovery in exports to the U.S. could be halted
after a U.S. reserve release," a trader of West African crude