New U.S. Oil Makes Inroads Into Asia as Buyers Plug Iranian Gap

(Bloomberg) -- A new grade of American light crude is making its way to oil-starved buyers in Asia, giving relief to some of the region's biggest plastics makers as they seek alternatives to feedstock from Iran.

South Korean refiners and petrochemical makers are purchasing West Texas Light crude, a new American grade that's produced in the Permian Basin of west Texas and New Mexico. Hyundai Oilbank Co. and S-Oil Corp. most recently bought the grade for delivery in September and October. The oil, which is light and sweet in nature, yields a high proportion of naphtha and other distillates when processed, with low levels of impurities such as sulfur.

Processors across Asia have been keen to find substitutes for Iranian crude and an ultra-light oil known as condensate, after the U.S. pared back waivers permitting purchases from the Persian Gulf state. In South Korea, companies with purpose-built units that break down condensate into the building blocks of plastics, however, have been the worst hit due to a halt in Iranian South Pars flows. That prompted buyers to snap up alternative supplies from Qatar, and haul replacements from as far away as Nigeria, Norway and the U.S.

Hyundai Oilbank purchased the West Texas Light crude for delivery in October, while S-Oil bought 1 million barrels of the grade for September delivery, according to traders with knowledge of the matter who asked not to be identified as the information is private. For S-Oil, the West Texas Light grade will replace costlier supplies of Qatari condensate, since the company doesn't typically buy Iranian oil.

Also read: U.S. Oil Lets Top Korean Refiner Pivot Away From Middle East

West Texas Light, which makes up 20% of production in the Permian, is being marketed to North Asian refiners as a petrochemical feedstock and refinery input that's an alternative to Iranian condensate, Macquarie Research said in a report in May. The grade with an API gravity reading of 45-50 is lighter than the more often exported WTI Midland crude with API gravity of 38-42.

South Korea's monthly crude imports from the U.S. has averaged about 10 million barrels in the first six months of this year, compared to about 2.35 million barrels in the same period last year. While some U.S. Eagle Ford oil cargoes were rejected due to contamination earlier this year, the North Asian nation was the second-biggest buyer of U.S. oil in May, according to Energy Information Administration's latest data.

To contact the reporter on this story: Sharon Cho in Singapore at ccho28@bloomberg.net

To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Ben Sharples

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