South Korea makes rare large purchase of West African crude oil

Energy Voice

South Korea’s GS Caltex Corp is set to receive a shipment of 2 million barrels of West African crude, dwarfing the country’s usual purchases from the region as it looks to diversify supply away from the Middle East.

The purchase will help soak up a glut of supply among West African producers, who have been hit as the U.S. shale oil boom curbs demand in what was once their main market and as OPEC Gulf states boost supply.

Middle Eastern producers have raised their selling prices to Asia in recent months following solid demand in that region, prompting some buyers to try to broaden their sources of supply, with GS Caltex already turning to Mexico for crude.

South Korea’s second-biggest refiner is due to receive a total of 2 million barrels of crude from Angola and the Republic of Congo that is being shipped on the Very Large Crude Carrier (VLCC) New Frontier, according to Reuters shiptracking data.

The vessel, currently southeast of Madagascar, is expected to arrive at South Korea’s Yeosu port on July 1, the data showed.

A GS Caltex spokesman said he could not immediately respond when contacted by telephone. Reuters could not confirm the price and grade of the crude being shipped.

South Korea imported an average of just over 500,000 barrels of West African crude per month over the last two years, or less than 1 percent of total import volumes, according to Reuters data.

The New Frontier was chartered by China’s Unipec, the trading arm of state-owned Sinopec, and loaded towards the end of last month. A Sinopec spokesman declined to comment.

The cargo was purchased in April during the normal trading window, so is unlikely to be one of the numerous unsold West African shipments that have drawn market attention, according to a person familiar with the deal. He declined to be identified as he was not authorised to speak with media.

China and India have also emerged as large buyers of West African crude in recent years.

Although Angola and the Republic of Congo are not generally considered to be in West Africa, oil markets categorise crude from those countries as West African.

GS Caltex this year bought oil from Mexico for the first time in 25 years, while Hyundai Oilbank Co Ltd signed a deal with Mexico’s state oil firm Pemex to take 5 million barrels of crude in the second half of 2015.