U.S. Oil Exports Ramp Up as Buyers Seek Alternatives to Saudi Crude

NEW YORK/SINGAPORE (Reuters) - The oil markets were in turmoil on Monday after the weekend's attack on Saudi facilities, as refiners in top consumer Asia looked for alternative supplies, U.S. crude producers ramped up efforts to export crude and Saudi Arabia tried to secure refined products.

Crude prices surged up to nearly 20% on Monday after Saudi Arabia, the world's largest oil exporter, cut output at its processing facilities at Abqaiq and Khurais by a total 5.7 million bpd, or half the kingdom's production, after Saturday's attack, with no indication on when output will be resumed.

While most countries have ample storage to meet immediate needs, companies are already planning for shipments for weeks and months into the future to make up for a shortfall in light crude and refined products, market participants said.

The lost Saudi crude oil output represents about 5% of global crude supply. Analysts from research consultancy Bernstein said Saudi oil exports are mostly geared towards China, which takes about 1.7 million bpd, or nearly 25% of Saudi exports.

Booking activity and freight rates for cargoes from the U.S. Gulf Coast rose over the weekend and on Monday, a ship broker said. U.S. physical crude along the Gulf Coast, which can be exported most easily, was in high demand, with premiums soaring to levels not seen since June for certain grades.

"The export window for U.S. crude is going to be wide open," said Phil Flynn, an analyst at Price Futures Group in Chicago. "You are probably going to see record amounts of U.S. exports."

Booming shale production already allowed the United States to close in on and briefly overtake Saudi Arabia as the world's top oil exporter in June, after U.S. crude exports surged above 3 million bpd, the International Energy Agency (IEA) said last week.

Asian refiners, the top destination for Saudi crude, can tap strategic oil reserves if necessary to cover 30 to 220 days of oil imports depending on the country, while oil product supplies are adequate for now as new refining capacity has been added this year, traders and market participants said.

China currently has about 325 million barrels of oil in its strategic petroleum reserves, enough for about 33 days of imports, according to industry estimates.

Arab Light and Arab Extra Light crude oil grades make up about one third of China's total Saudi oil imports, according to Seng Yick Tee, a senior director with consultancy SIA Energy.

Still, refiners in China do not seem worried about security of oil supply.

A company executive from Zhejiang Petrochemical, one of China's two new mega integrated refineries, said inventories of crude oil were "comfortable" as it gears up for full production at its new 400,000-bpd plant in east China later this year.

For U.S. refiners, Saudi imports have accounted for just 3% of feedstocks this year. Chevron Corp, Motiva, Marathon and PBF process the bulk of Saudi crude refined in the United States.

South Korea said it would consider releasing oil from its strategic reserves if the situation on crude oil imports worsens, although the country's energy ministry did not anticipate any short-term impact on securing supplies.

India's oil ministry said it was closely watching the situation and was in talks with Indian refiners and Saudi Aramco. The latter has indicated there will be no shortage in supplies, the ministry said.

While newer refineries in Asia are able to process heavier crude grades should Saudi Arabia cut exports of its lighter crudes, it may not be quick or cheap.

Two traders dealing with Saudi oil said Saudi Aramco's trading arm Aramco Trading Company is already making enquiries about importing refined products, although the volumes sought were not clear.

"They are looking (for oil products) since they are trimming run rates at some of the refineries," a Singapore-based trader said.

Industry analyst Energy Aspects estimates that about 1 million bpd of Saudi Aramco refining operations have been curtailed, releasing medium and heavy crude oil grades for export, with the state oil company likely to buy significant quantities of gasoline, diesel and possibly fuel oil.

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