Taiwan’s state oil refiner, CPC, has reportedly signed its first long-term deal to buy US crude, which is a rare occurrence since Asian buyers typically buy on the spot market.
The deal is for delivery in 2019, Reuters reported on October 22, citing an anonymous company official.
CPC has awarded a tender to an unnamed US trading company, which will receive 2 million barrels of US WTI Midland crude each month between February and June, the official was reported as saying.
The deal will ensure that Taiwan gets a steady supply of US crude for five months from early next year. The Asian country began regularly importing US oil at the end of last year.
Taiwan has limited domestic energy resources and has to rely heavily on oil imports. The majority of the country’s crude imports traditionally came from Angola and the Persian Gulf, but Taiwan is now the third largest buyer of US crude in Asia.
The country imports around 3.6 million barrels of crude per month on average, between January and November, according to Refinitiv Eikon data. These imports are mostly offloaded at Kaohsiung, CPC’s import terminal.
The CPC official said the company has also separately bought 6 million barrels of spot WTI Midland crude to be delivered to Taiwan in January, and that it is priced at a premium to dated Brent.
The CPC supply deal is significant, as it indicates that the counterparties may have found a way to bridge a gap in pricing US oil to Asia, Reuters noted.
Most buyers still prefer Middle Eastern and Russian oil, which is priced on the cheaper Dubai benchmark or Atlantic Basin cargoes priced on Brent, rather than US oil priced off WTI, the news agency said.
Rising US oil production is leading energy companies to look for new export markets, to prevent domestic oversupply. Earlier this year, the US Energy Information Administration (EIA) predicted that US crude output would rise more than previously expected to 12 million bpd by the fourth quarter of next year.