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* S. Sudan resumes crude exports after 17-month halt
* China, S. Korea snap up cheaper Dar Blend from S. Sudan
* Dar Blend exports to double to more than 4 mln bbls in July
* Nile Blend exports seen at 1.2 mln-1.8 mln bbls a month
By Florence Tan
SINGAPORE, July 2 (Reuters) - South Sudan's shipment of its first crude cargoes in June after 17 months out of the market, on top of falling Japanese demand for similar medium to heavy sweet grades, has sent premiums tumbling.
The restart knocked August prices of one heavy sweet, or low sulphur, crude from Australia to 1-1/2 year lows, and pressured other premiums for other medium to heavy grades, improving margins for refiners able to run such oils.
Chinaoil and Unipec, the trading arms of PetroChina and Sinopec , have snapped up cheaper barrels after South Sudan and neighbour Sudan resolved a dispute over pipeline fees that had been running since January 2012.
"The market for medium sweet crude will die unless Japan comes back to buy, which is not the case at the moment," a trader with a North Asian trading company said.
Sellers such as Woodside Petroleum, BHP Billiton Ltd, Apache Corp, Inpex Corp, Mitsui & Co and Chevron Corp had all seen premiums for their crudes hit records as Japan used more oil for power generation after shutting most of its nuclear plants following the earthquake and tsunami of 2011.
This year Japan has been turning to cheaper coal in an effort to cut its fuel bills.
In the first four months of the year, Japan's top 10 utilities consumed a third less crude versus the same period last year, data from the Federation of Electric Power Companies of Japan showed.
Australia's Vincent oilfield - another crude that can be used in power plants - is also due to restart in August-September, adding 1.5 million more barrels of heavy sweet supply each month.
"There is more and more crude, but more refineries prefer heavier and higher sulphur crude," said the North Asia trader.
The increase in supply has pressured spot premiums for Australian and Indonesian crudes such as Enfield, Stybarrow, Pyrenees, Vincent, Van Gogh and Duri.
Spot premiums for Pyrenees, for instance, have slipped for August loading barrels below $6 a barrel to dated Brent, the lowest in 1-1/2 years.
Buyers of Australian crudes were previously paying premiums as high as $7 per barrel.
"Without demand from the Chinese, you can't maintain prices at that level," a trader with a North Asian refiner said.
With South Sudan's Dar Blend, buyers get discounts of about $10 per barrel to dated Brent, more than enough to compensate for the lower quality of the Sudanese crude.
Australian grades have a higher content of vacuum gasoil that can be processed into valuable middle distillates. Dar Blend is more acidic and cannot be used at many refineries.
Besides the Chinese trading companies, South Korea's top refiner SK Energy has also bought a July Dar Blend cargo, even though it does not typically buy the grade, traders said.
South Sudan stopped exporting oil in early 2012 because of a row with neighbour Sudan over pipeline fees. It resumed its oil output in April and the first exports were shipped in June.
Dar Blend exports are expected to double to more than 4 million barrels in July from 2.2 million barrels the previous month, traders said.
Beyond July the outlook remains unclear because Sudan has threatened to close the pipelines again as it South Sudan of supporting insurgents. (Editing by Tom Hogue)