U.S. oil exports to Japan, South Korea rise as refiners reap discounts

South Korean President Moon Jae-in and Japanese Prime Minister Shinzo Abe arrive for their meeting in Pyeongchang, South Korea

The United States oil exports to Japan and South Korea will rise to record highs this September as Asian refiners take advantage of the steep discounts American sellers are offering after losing Chinese customers amid the trade dispute between Washington and Beijing.

Ship tracking data in Thomson Reuters Eikon showed that oil exports from the United States to South Korea in September will rise to a record average of at least 230,000 barrels per day (bpd). U.S. shipments to Japan will also rise to a record average of at least 134,000 bpd, the data showed.

Two traders and a brokerage source said South Korean and Japanese refiners have been taking advantage of steep discounts of up to $10 per barrel between the U.S. crude benchmark West Texas Intermediate (WTI) CLc1 that American producers base their crude sales on and the international Brent crude LCOc1 benchmark.

“They (South Koreans and Japanese refiners) need to find replacements for their drop in Iran imports and a fair amount of that is coming from the States. The steep discount of WTI to Brent is hard to resist,” said a Singapore-based ship broker.

“Our U.S. crude oil purchase is purely because of its price advantage,” said Kim Woo-kyung, a spokeswoman at SK Innovation (096770.KS), the owner of South Korea’s top refiner SK Energy.

A spokesman for Japan’s biggest refiner JXTG Nippon Oil & Energy Corp (5020.T) said his firm had not received government orders to halt Iranian oil imports.

“We will determine optimum crude in our own procurement plan,” he said.

Japan and South Korea were among the first major Iranian clients to bow to U.S. pressure and cut orders from Iran, the third-largest producer among the Organization of the Petroleum Exporting Countries, with South Korea importing its last cargoes in July, the trade data showed.

Meanwhile, India, the second-biggest buyer of Iranian oil after China, has also dialed back Iranian orders while importing more from the United States, the data showed.

Peace PIAK