* Flood of light crudes come as their premiums over heavy
* Thailand buys Russian Sakhalin Blend, U.S. Eagle Ford
* Taiwan CPC buys Algerian Saharan Blend in late Q2
By Florence Tan and Jane Chung
SINGAPORE/SEOUL, March 27 As the cost of light
crude drops, some refiners in Asia are snapping up cargoes of
the oil that is easier and cheaper to process than their usual
diet of heavy crude, chasing profits from making diesel and
As a result of the OPEC production cuts, the world's oil
supply has become more light and those oil types yield more
diesel and gasoline, the fuels that command the highest margins,
when processed in a crude distillation unit, the most basic unit
a refinery uses to make fuels.
Since purchasing the lighter oil makes it easier to extract
diesel and gasoline, Asian refiners have jumped on the crude
supply trend by buying light oil from Russia, Africa and even
from as far as the United States to bolster their profits.
"Korean buyers are buying light crude because its price
competitiveness is improving," a local South Korean refining
source said on the condition of anonymity as he was not
authorised to talk publicly about trading.
"Light crude used to be pricey and now as it's oversupplied,
it's great for refiners. We can buy it at cheaper prices, save
costs and produce more high value-added products like light
naphtha and gasoline. We're hoping this trend will continue."
South Korean refiner Hyundai Oilbank bought Sakhalin Blend
crude for April and May, several market traders said, using the
light oil to blend with its typically heavy crude slate.
Taiwanese refiner CPC added up to two more light oil cargoes in
the second quarter and bought Algeria's Saharan Blend to partly
replace heavier Angolan oil and for processing at its new
splitter, said a company spokesman.
Meanwhile, Thai Oil bought Sakhalin Blend and U.S.
Eagle Ford crude for the first time ever in the second quarter,
while Thailand's PTT also bought the Russian grade.
Refiners typically measure the relative difference between
light and heavy oil grades by looking at the premium of Arab
Light crude from Saudi Arabia to Arab Heavy. That spread is at
$2.45 a barrel in April, according to the latest official
selling prices the country has released, the narrowest in seven
The production cuts by the Organization of the Petroleum
Exporting Countries (OPEC) mainly reduced the supply of medium
heavy crude grades from the Middle East that yield more residual
fuel oil that needs further and more costly upgrading into light
"NICE PROBLEM TO HAVE"
U.S. production of light oil has stepped in to fill the gap
from the OPEC cuts and Asian refiners are buying light grades
they have stayed away from in the past.
U.S. output, mainly of light oil, is up by 670,000 barrels
per day since October, data from the Energy Information
Administration showed, with traders are moving some of the
lighter supply to Asia. C-OUT-T-EIA
The turn to light crudes is a bit of a headache for many
Asian refiners, who have spent millions of dollars installing
cokers, crackers and other upgrading units that can process
residual fuel oil into higher-value fuels.
"The world has gotten awfully light. It's a nice problem to
have, but if you have a coker, the last thing you want is to
have a stranded asset," said Jamie Webster, a fellow at Columbia
University's Center on Global Energy Policy.
(Reporting by Florence Tan in SINGAPORE and Jane Chung in
SEOUL; Additional reporting by Osamu Tsukimori in TOKYO; Editing
by Christian Schmollinger)