China and South Korea are increasing their purchases of crude oil from African countries following a significant decline in international shipping costs, making oil supplies from West and Central Africa more competitive in Asian markets.
The development is providing fresh opportunities for oil-producing countries such as the Republic of the Congo, Angola and Gabon, whose crude oil has become more affordable to transport to Asia.
China’s Unipec, the oil-trading arm of state-owned energy giant Sinopec, purchased two cargoes of Congo’s Djeno crude last week at discounts of approximately $22 per barrel against dated Brent, according to traders cited by Reuters.
In a separate transaction, an independent Chinese refinery based in Shandong province purchased one million barrels of Angola’s Plutonio crude for delivery in late December or early January.
South Korea’s largest oil refiner, SK Energy, has also provisionally chartered a Suezmax tanker to transport crude oil from Gabon to Ulsan, South Korea, in December.
The renewed interest from Asian refiners follows a sharp reduction in tanker freight rates, which have fallen by approximately 50% from their October peaks, according to Baltic Exchange data reported by Reuters.
FALLING SHIPPING COSTS MAKE AFRICAN OIL MORE ATTRACTIVE
The decline in transportation costs has improved the competitiveness of African crude against supplies from other oil-producing regions.
During October, tanker freight rates reached exceptionally high levels, making long-distance shipments from Africa and Brazil increasingly expensive for Asian buyers.
The high costs forced some refiners to reduce their spot purchases, putting pressure on crude oil prices.
However, shipping costs have since fallen as more vessels became available following the completion of earlier deliveries.
A trader familiar with the market told Reuters that the cost of delivering African and Brazilian crude oil to China had declined by between $5 and $10 per barrel compared with the previous month.
The reduction has encouraged Asian buyers to reconsider supplies from the Atlantic Basin, particularly West and Central African producers.
CHINA SECURES CONGOLESE AND ANGOLAN CRUDE
Unipec’s purchase of two cargoes of Congo’s Djeno crude represents a renewed interest in the country’s oil supplies.
The transactions were reportedly agreed at discounts of around $22 per barrel to dated Brent on a free-on-board basis. This means the crude is priced at the loading point, while transportation and other delivery expenses are paid separately.
The quantities of the two Congolese cargoes were not disclosed.
Unipec has also provisionally arranged two Suezmax tankers to transport West African crude to Asia between late November and early December. Another very large crude carrier has been lined up for an early-December loading.
Meanwhile, the independent Chinese refinery that purchased one million barrels of Angola’s Plutonio crude agreed to a premium of approximately $15 per barrel above ICE Brent.
This represents a decline from more than $20 per barrel recorded for Angolan crude grades about two weeks earlier.
The reduction in premiums, alongside lower shipping expenses, has improved the attractiveness of Angolan oil to Chinese refiners.
SOUTH KOREA TURNS TO GABON
South Korea is also positioning itself to benefit from the changing market conditions.
SK Energy, the country’s largest oil refiner, has provisionally chartered a Suezmax tanker to load crude in Gabon for delivery to Ulsan in December.
The reported arrangement represents another indication of growing Asian interest in African oil supplies.
However, the tanker booking is provisional, and details concerning the specific crude grade, cargo volume and purchase price have not been disclosed.
TANKER AVAILABILITY IMPROVES AFTER OCTOBER’S PRICE SURGE
The sharp decline in shipping costs follows a period of exceptionally high demand for oil tankers.
In October, increased exports from Middle Eastern producers created additional demand for vessels, particularly those involved in ship-to-ship transfers outside the Strait of Hormuz.
Demand also increased as independent Chinese refiners shifted towards non-sanctioned crude supplies and sought to use their annual import quotas before the end of the year.
According to Vortexa shipping analyst Wanying Zhang, the recent correction in freight rates has been driven largely by improved vessel availability following October’s tight shipping market.
Zhang said the number of loaded mainstream very large crude carriers and Suezmax tankers in East Asia had increased by approximately 15% since early September.
The increase suggests that more vessels could become available for new shipments as they complete the discharge of their existing cargoes.
AFRICAN OIL PRODUCERS COULD BENEFIT FROM ASIAN DEMAND
The changing shipping market could strengthen the position of African oil-producing countries seeking to expand their presence in Asian markets.
Angola, the Republic of the Congo and Gabon are among the countries benefiting from renewed interest as lower freight charges reduce the cost disadvantage associated with transporting their crude over long distances.
Analysts at Energy Aspects have also indicated that lower long-distance tanker rates are making crude grades from west of the Suez Canal more attractive to Asian buyers.
For China, the relatively high premiums on competing Russian ESPO crude could further support demand for heavier Angolan oil.
The latest transactions therefore highlight how changes in global shipping costs can influence international oil trade, creating new opportunities for African producers and refiners seeking alternative sources of crude.
