Analysis: US to be among Japan's top 10 oil suppliers in May

* TonenGeneral's maiden US crude cargo to arrive early May
* Refiners took advantage of workable arbitrage

The US is set to become one of Japan's top 10 oil suppliers in May when roughly 2 million barrels of US crude and condensate arrive in the month, just months after Washington lifted crude export restrictions put in place 40 years ago.

Japanese refiner TonenGeneral will receive its first US crude cargo on a Suezmax tanker for delivery at its 258,000 b/d Kawasaki refinery in Tokyo Bay in early May after its recent purchase, market sources said Wednesday.

TonenGeneral's US crude cargo will arrive in Japan around the same time as fellow refiner Cosmo Oil's 1 million barrels of US crude and condensate cargoes after delays in loading schedules, market sources said.

A TonenGeneral spokesman declined to comment about whether or not it has bought the first US crude cargo.

The sources said TonenGeneral's purchased US crude cargo is on the Cape Bari and Cosmo Oil's US crude and condensate cargoes are on the Agistri, with both scheduled to arrive Japan in the first 10 days of May.

The US crude imports by TonenGeneral and Cosmo Oil will be the first for Japan since the US lifted crude export restrictions at the end of last year.

Cosmo Oil's purchased cargo, comprising its first purchase of 300,000 barrels of WTI crude and 700,000 barrels of US condensate, had been scheduled to arrive earlier, in mid-April, for test runs at its 220,000 b/d Chiba refinery in Tokyo Bay and 132,000 b/d Yokkaichi refinery in central Japan.

TonenGeneral received its US condensate cargo of 318,773 barrels at its Kawasaki refinery in September, while Cosmo Oil has been one of Japan's most active buyers of US condensate.

Importing 2 million barrels of US crude and condensate in May would equate to an average of around 65,000 b/d, placing the US among Japan's top 10 crude suppliers in the month.

In May 2015 Japan imported an average of 3.31 million b/d of crude, and a country exporting in excess of 33,000 b/d of crude to Japan would have found itself among the top 10 suppliers.

Regional sweet and sour crude traders said Phillips 66 could be the seller of the US crude TonenGeneral has purchased and the volume sold could be equivalent to fill a Suezmax-size cargo.

However, details of the US crude cargo remain unclear, while officials at Phillips 66 could not be reached for immediate comment.

"I suspect it's more of a light-end grade rather than heavy waxy crude," said a Singapore-based crude trader. "Phillips 66 has been actively marketing [US crudes and condensates] to Asia since early this year."

ARBITRAGE ONCE WORKABLE

The lifting of the crude oil export ban in the US came at a good time for those Far East Asian refiners seeking arbitrage opportunities, as front-month WTI traded at a discount to Dubai swaps during the fourth quarter of 2015 and early half of February this year, according to traders.

The front-month WTI-Dubai swaps spread was assessed at $2.95/b in Singapore Tuesday, but the US benchmark traded at a discount of $63 cents/b to Dubai swaps on February 16, while the discount was much wider during the fourth quarter of 2015, touching minus $1.18/b on November 11.

A weaker WTI value versus Dubai typically makes Dubai-based crudes less competitive against WTI-based crudes and traders said the negative WTI-Dubai swaps spread could have encouraged Japanese and even Chinese end-users to snap up US supplies for testing purposes. "[The US to Asia] arbitrage was workable for a while," said a crude trader with a Chinese refining company.

"Not anymore, but [the arbitrage window] certainly was open [in February and late last year], otherwise there wouldn't be so many [US crude cargoes] coming here."

--Takeo Kumagai, takeo.kumagai@platts.com
--Gawoon Philip Vahn, philip.vahn@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com

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