EUROPEAN and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month, seeking to plug any supply gap left by Organization of the Petroleum Exporting Countries (OPEC) production cuts.

    Over 11 million barrels of North Sea Forties crude have either been offloaded or are on their way to Asia, adding to a record 11 million barrels of Azeri crude oil from Azerbaijan, oil trade flows data showed.

    The record export volumes come on expectations of tighter Middle East crude supplies due to plans by the OPEC to cut production in an attempt to prop up prices.

    Seeing an opportunity to sell North Sea oil profitably in arbitrage deals to Asia, seven supertankers chartered by commodity traders Vitol and Mercuria, European oil major Royal Dutch Shell, and China’s refiner Unipec, have either delivered or are expected to soon offload European crude to China and South Korea this month, according to trade sources.

    “Asia needs the oil, Europe has it. The OPEC cut has raised prices, and that now makes it profitable to send European oil to Asia,” said one senior trader with knowledge of the deals on condition of anonymity.

    December’s OPEC deal, in which the group agreed to cut production by 1.2 million barrels per day (bpd) in the first half of 2017, pushed up benchmark price Dubai against Brent and West Texas Intermediate, allowing Asia to pull more competitively priced supplies from the Atlantic Basin.

    An ongoing Brent contango, a market structure where oil becomes more expensive in future months, also enabled traders to lock in profits for crude on long voyages.

    Shipping North Sea Forties crude from its load port Hound Point in Britain to customers in North Asia, including Japan, South Korea and China, takes over six weeks.

    The deals highlight the predicament facing OPEC and other producers that have agreed to cuts, including Russia and Oman. (SD-Agencies)