(Repeats without changes to text)
* OPEC states tended to cut heavier oil, driving up price
* North Sea premium over Middle East crudes now eroded
* Asian demand for North Sea crude may outlive OPEC cuts
By Amanda Cooper and Florence Tan
LONDON/SINGAPORE, April 28 OPEC production cuts
have created record Asian demand for European oil and made China
the second biggest consumer of North Sea crude as flows from its
usual Middle East suppliers dip.
Rising Asian appetite for North Sea crude has largely been
fuelled by the falling premium charged for North Sea crude over
rival Middle East oil and this demand could last beyond OPEC's
supply cuts if that favourable pricing persists.
Thomson Reuters Eikon data shows China imported almost 38
million barrels of North Sea crude from the start of the year
until late April, compared with about 8 million barrels by the
same point in 2016.
China now lies second to Britain, the biggest consumer of
North Sea crude, which had bought 49.7 million barrels by late
April this year. In January to April 2016, China ranked seventh.
The Organization of the Petroleum Exporting Countries,
Russia and other non-OPEC producers agreed to cut output by 1.8
million barrels per day (bpd) in the first half of 2017 to lift
prices and reduce global inventories.
With stockpiles still bulging, Gulf producers and other
producers say cuts could be extended to December, adding a
further incentive for Asian buyers to look beyond their usual
"East of Suez, crude balances look like they will get
progressively tighter year-on-year all the way through to the
end of 2017," FGE analyst James Davis said.
"We suspect there will be, from a supply perspective, a need
for crude to move across to Asia from the North Sea," he said.
Reluctant to relinquish market share to U.S. oil shale
producers, OPEC states have kept their official selling prices
low and used their crude stockpiles to keep clients supplied.
But they have tended to cut output of medium, more
sulphurous crudes that are cheaper, and maintained flows of
lighter, less sulphur-rich oil, which usually sell for more.
With less of those medium crudes on the market prices for
that oil have climbed, sending the premium that is usually paid
for North Sea oil to its lowest since 2010 DUB-EFS-1M.
The premium for North Sea Brent, the peg for many of world's
lighter crudes, over the Dubai benchmark, which underpins medium
and heavier grades common in the Middle East, has fallen below
50 cents a barrel from $2.50 in late November, when OPEC
announced its cuts.
"North Sea crude keeps coming to Asia and now there should
be more given the price structure," a trader at a North Asian
China customs data shows the cost of importing North Sea oil
was even more favourable in March, showing importing a barrel of
British crude cost $56.70, compared with $57.80 for a barrel
from the United Arab Emirates, even when the UAE lies 8,000
miles closer to China than Scotland's North Sea coast.
"North Sea oil suits the Korean diet and the Chinese can
still take it if the price is right,” a Singapore-based trader
Other factors are also encouraging Asian consumers to seek
out new suppliers. Chinese domestic oil production has been
eroded because of weak oil prices, while refineries in the
world's biggest car market have been expanding.
Overall, Asian refining capacity will expand by a net
450,000 bpd in 2017, a rise of 1.5 percent over Asia's total
installed capacity now of nearly 29 million bpd, Thomson Reuters
Eikon data shows.
"We expect imports to continue registering year-on-year
gains as a narrow Brent-Dubai spread ... encourages the
purchasing of Atlantic Basin crudes in Asia," Energy Aspects
said in a note, even though it said China had "clearly
overbought" crude in the first quarter of the year.
(Additional reporting by Henning Gloystein in Singapore;
Editing by Edmund Blair)