Asia’s imports of sweet crude oil are on track to rise sharply in November (mom) as the region’s refiners pivot buying activity, at least in part, to minimise elevated desulphurisation costs.

Asia imports of sweet crudes (mbd)

Total arrivals of sweet crude into Asia in November are expected to reach 3.7mbd, up from 3.1mbd the previous month, and a reversal of the declining trend seen during August-October.

The largest crude buyers in the region also account for the lion’s share of sweet crude arriving this month with Chinese imports of sweet crude reaching a 7-month high 1.6mbd. India’s sweet crude imports are also up mom, as is the case with other key importers South Korea and Singapore.

A crucial backdrop for the increased sweet crude intake is the high energy costs currently felt by refineries and high prices for hydrogen – which is used for desulphurisation and in diesel-producing hydrocracker units. The latter is likely to impact Chinese refining operations especially, given the stronger domestic demand for diesel. However it is also important to note that increase in sweet crude imports also falls under the umbrella of total crude imports rising, albeit at a slower rate than just sweet crude.

On the supply side, a recovery in exports from West Africa – a region with a high proportion of sweet crude production – would be welcome news to Asian buyers. However Nigerian and Angolan crude exports have been impaired in recent months by a string of operational issues and structural production decline. Both country’s production has remained well below OPEC quotas in recent months.

This leaves the US Gulf Coast (PADD 3) as the next alternative supply source for Asian sweet crude buyers. Our latest data shows a clear pickup in PADD3 to Asia exports with around 1.1mbd departing in November, up from around 760kbd across September-October. Should total US crude exports continue their upward trajectory, we could see even more flows to Asia in the coming weeks.

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