May 14, 2018 / 10:09 AM / 2 months ago

Exclusive - Saudi Aramco trading arm ATC sells first U.S. oil to United Arab Emirates: sources

SINGAPORE/NEW YORK/NEW DELHI (Reuters) - Saudi oil producer Aramco’s trading arm has begun supplying U.S. condensate, an ultra-light crude oil, to the United Arab Emirates (UAE), four people with direct knowledge of the matter said on Monday, underlining the giant firm’s global ambitions.

FILE PHOTO: Oil tanks seen at the Saudi Aramco headquarters during a media tour at Damam city November 11, 2007. REUTERS/ Ali Jarekji/File Photo

The sale marks Aramco Trading Company’s (ATC) first U.S. crude spot trade, the people said, with ATC tapping Aramco’s Motiva Enterprises [MOTIV.UL] unit in the United States as a supply source for two shipments to the UAE.

Aramco sells almost all its crude under long-term contracts, but decided last year to trade in non-Saudi crude in the short-term spot market.

For the UAE trades, a first shipment of 1 million barrels (bbl) of U.S. condensate aboard the tanker ‘Astra’ was unloaded at Ruwais on May 12, according to the sources and shipping data on Thomson Reuters Eikon. All the sources declined to be identified because they were not authorised to speak to media.

Motiva has also chartered the tanker ‘South Sea’ to ship about 1 million bbl of condensate from the U.S. Gulf to Ruwais in May for about $2 million, one U.S.-based shipping source said. Both vessels are ‘Suezmax’ tankers, with capacities from 120,000-200,000 deadweight tonnes, named after the Suez Canal as they are able to transit the canal fully laden.

As of May 12, the ‘South Sea’ was docked at Corpus Christi in Texas, shipping data on Thomson Reuters Eikon showed.

Motiva, which operates a 603,000-barrel-per-day refinery at Port Arthur, Texas, and ATC did not respond to requests for comment.

NEW STRATEGY

While the shipments from the United States are a first, the move fits into a strategy outlined by Aramco executives last month.

“ATC has started supplying some condensate from West to the East. It started only a few weeks back, slowly, but we will have to make sure that there is an economic sense for us for crude trading,” Saudi Aramco Chief Executive Officer Amin Nasser told Reuters, speaking on the sidelines of a conference in April.

Nasser said ATC had been focusing on crude oil processing arrangements at refineries with spare capacity, which are mainly located in Europe.

But more ATC trades with U.S. oil are set to follow. Motiva is still looking for ships to move U.S. oil to the East, the shipping source said, as price differentials between U.S. crude CLc1 and international crude LCOc1 make such trades profitable.

Earlier this month, ATC was also one of the successful bidders in a tender issued by the Abu Dhabi National Oil Company (ADNOC) to buy condensate for delivery in July to September, the sources said.

ADNOC bought 6.5 million barrels of condensate in the tender with the bulk of the supplies coming from the United States, a source familiar with the matter said.

Abdulla Salem Al Dhaheri, Director, Marketing Sales & Trading at ADNOC, told Reuters: “By tendering our condensate we are able to diversify our supply and achieve better commercial value. For example, we are able to take advantage of arbitrage cargoes from long distances that have delivered ADNOC more value and higher returns.”

He added that ADNOC now buys condensate from various suppliers.

ADNOC started importing U.S. oil in the second half of last year after a diplomatic row with Qatar.

ATC is also looking to extend its trading operations in Asia.

ATC’s CEO Ibrahim al-Buainain told Reuters last month it plans to handle crude in Asia through its Singapore office in the third quarter of this year, and aims to boost its volumes for trading crude and refined products globally to 6 million barrels per day (bpd) by 2020, up from negligible amounts currently.

Buainain said his company mostly handles third-party crude and has traded “very small” Saudi crude volumes in processing deals in return for refined products.

Reporting by Devika Krishna Kumar in NEW YORK, Nidhi Verma in NEW DELHI, Florence Tan in SINGAPORE and Rania El Gamal in DUBAI; Additional reporting by Jessica Jaganathan in SINGAPORE; Editing by Kenneth Maxwell

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