February 14, 2017 / 4:55 PM / 6 months ago

North Sea Forties crude shipments to Asia may hit new high in Feb

LONDON (Reuters) - The volume of North Sea Forties crude heading to Asia on supertankers this month may reach a record, according to shipping data and trade sources, reflecting more favourable arbitrage economics.

Three Very Large Crude Carriers (VLCCs) -- Aquila, Alice and Bunga Kasturi Lima -- are likely to head to China and South Korea this month, according to the Reuters data and sources. Another two, Sandra and Phoenix Vigor, are also thought likely to sail to Asia, sources said.

The movement of large volumes of Forties out of northwest Europe is helping to prop up the Brent market and Forties crude differentials, as Forties is the largest crude grade underpinning the Brent benchmark.

"This is what is supporting the market - it is a bit over-supplied otherwise," said a North Sea trade source.

There were four VLCC shipments of Forties to Asia in January, according to a trade source and Reuters shipping data - the most since October 2015. If five do take place in February, this would be a new high.

A narrowing spread between crude benchmarks in Europe and Asia is helping to increase the flows of Brent-linked crude from the West to Asia. Brent crude's premium to Dubai is trading close to its lowest in more than a year.

Other factors encouraging the flow are output cuts by OPEC and other producers and a narrower Brent market contango, which has reduced the incentive to keep Forties in floating storage.

China and South Korea are regular buyers of Forties. Flows to South Korea as a result of a trade pact with the European Union became a common feature in 2012.

When the arbitrage is viable, traders typically charter VLCCs that can carry 2 million barrels to load Forties from the Hound Point terminal in Scotland.

Editing by David Evans

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