The popularity of low sulfur crude oil among Asian refiners is steadily increasing. This is an important trend to understand, because it creates a situation that many heavy and overweight sour crude oils (such as those found in Canadian oil sands and Venezuela) may become stranded assets earlier than expected. With the soaring demand for low-sulfur crude oil in Asia, the price difference between low-sulfur crude oil and international benchmark Brent crude oil has reached the highest level in history.
Malaysian crude oil was once the most expensive crude oil in the world. Tapis-grade crude oil from Malaysia is produced in the waters near Malaysia Peninsula and has long been considered as the most expensive crude oil in the world. Tapis's light weight (API importance is 42.7 degrees) and extremely low sulfur content and sweetness (only 0.04%) make it an ideal raw material for refining high-quality gasoline, diesel and other fuels.
Recently, the popularity of Tapiz seems to be declining, and the current trading price is 7% lower than Brent crude oil, which can be explained by the increasing demand of Asian refiners for other high-quality crude oil grades. Earlier this year, some unexpected competitors challenged Tapis to become the most expensive brand in the world.
By September 2020, the prices of Australian heavy low-sulfur crude oil Vincent and Van Gogh are higher than Tapiz, although the API importance is 18.5 degrees and 17 degrees respectively, and the sulfur content is 0.55% and 0.37% respectively.
As Victor Kathona of Oilprice.com explained, this is because their actual mixing and extremely low pour points are-17 degrees Celsius and-15 degrees Celsius, respectively. Pour point is an important but often neglected characteristic of crude oil. This is the lowest temperature at which crude oil flows when it cools under the action of gravity. After this temperature, crude oil will become solid and will not flow, so it cannot be stored or transported through pipelines.
The pour point indicates the paraffin content in the crude oil mixture, because the larger the paraffin volume, the higher the pour point. High paraffin content is an undesirable feature for refineries because it increases the difficulty and cost of crude oil processing. Vincent and Van Gogh's crude oil pour point is very low, so the paraffin content is also very low, which further explains their soaring popularity.
Brazilian crude oil won the title of the most expensive crude oil in the world. There are signs that two Brazilian crude oil grades may win the crown of the world's most expensive crude oil. Since the implementation of IMO2020, the demand for Lula and Buzios crude oil brands in Brazil has soared, and IMO2020 limits the sulfur content of marine fuel to 0.5% (mass ratio).
Lula and Buzios crude oil grades are produced in Brazilian offshore oil fields near Haiyan. Both crude oils are medium-quality low-sulfur crude oils with API importance of 29 degrees and 28.4 degrees respectively, and low-sulfur content of 0.27% and 0.3 1% respectively. The pour point of Lula and Buzios is also very low, about 9 degrees Celsius, which indicates that the paraffin content is very low. Compared with many other crude oil mixtures, these paraffins combine low metal content, making them cheaper and easier to extract into high-quality gasoline, diesel oil and other fuels.
This explains the soaring demand for Lula and Buzios by Asian refiners. By the end of September, 2020, Brazil has become the third largest crude oil supplier in China, and ranked sixth in 20 18. In September 2020, Petrobras reported that the daily export volume of crude oil reached a record 1 10,000 barrels, most of which were shipped to China.
Not only is China snapping up Brazilian crude oil, but the demand of other countries such as the United States, Spain, Portugal and the Netherlands is also surging. Refiners from other Asian countries (especially India) said that they want to increase imports of Brazil's medium and low sulfur crude oil.
Strong demand and increasing demand for Brazil's medium and low sulfur crude oil will push up its price, and the price difference between Lula and Brent has narrowed significantly in the past year.
According to Oilprice, Lula's trading price is 4% higher than Brent crude oil, or nearly $2 per barrel. Lula's price is 8.5% higher than Tapitz's, equivalent to about $3 per barrel. Due to the recent strong demand, the price difference between Lula and Brent crude oil may further widen, especially if the demand from Asia remains strong. In addition, according to Brazilian national oil companies (such as Lula), the price of Buzios in China is higher than that of Brent crude oil.
Although the refining capacity of North America is the largest in the world, and a large part of it is allocated to the cheaper grade of heavy acid crude oil, the combined refining capacity of China, Indian and other Asian countries far exceeds that of North America. Most of these refineries are designed to process light crude oil with low sulfur content, which means that the demand for Brazilian low sulfur crude oil grade will not only remain strong, but will continue to expand.
This explains why Brazil's under-salt production continues to expand, despite the decline in overall crude oil production, because uneconomical under-salt, shallow water and onshore oil wells are closed due to the difficult pricing environment. In September 2020, the daily output of Brazil's oil under salt reached 2586626 barrels on average, up by 13% year-on-year.
This makes the crude oil production before salt account for 70% of the total hydrocarbon production in Brazil, compared with 665,438+0% a year ago. Tupi and Buzios oilfields produce Lula and Buzios crude oil, accounting for 72% of Brazil's oil production under salt.
Petrobras is the main force to increase production of oil under salt. In the third quarter of 2020, the average daily output of its pre-salt operation was 6.5438+0.65 million barrels, almost 265.438+0% higher than last year, accounting for 62% of Brazil's total pre-salt production.
Petrobras is investing heavily in increasing the production of Buzios oil field to increase the production of this extremely popular low-sulfur intermediate crude oil. The strong demand for Lula and Buzios oil grades, together with their premium over Brent crude oil and the expected rebound of oil prices in 20021year, will boost Brazil's oil revenue and Petrobras' profits.