(Adds background of condensate)
By Catherine Ngai and Florence Tan
NEW YORK/SINGAPORE, Jan 30 (Reuters) - Enterprise Products Partners failed to award a one-year tender to sell processed condensate after a round of low bids, U.S. and Asian trade sources said on Friday.
High freight costs and a narrowing in prices for Brent and West Texas Intermediate crude have made it difficult for traders to export U.S. oil to Asia and Europe.
Last week, Enterprise offered to sell a monthly 600,000-barrel cargo of processed condensate over a year-long period, with deliveries starting in March, a tender document showed.
But, without securing the annual commitment, Enterprise has turned to offering spot cargoes for the ultra-light oil, a U.S.-based trader said.
A spokesman for Enterprise declined to comment because of company policy not to publicly share specific details of its ongoing commercial activities.
Traders say the main issue is that the tender for the typically discounted product was not attractive, given the arbitrage between Brent and U.S. crude.
“I wouldn’t be surprised if all the bids were at discounts,” a trader with a North Asian refiner. “It has to be in a discount of $4-$5 to WTI to make it work into Asia.”
The exports of historically discounted condensate into higher-priced foreign markets have given value to the often unwanted byproduct. Discounts on Eagle Ford condensate, which last summer was sold around $10 to $12 a barrel under WTI, is now trading around $4 to $5 under WTI or higher. Traders say the tender asked for premium to WTI.
In a fourth-quarter earnings call this week, Enterprise said that condensate will ultimately be exported, although it’s driven by market fundamentals.
“This is a supply driven business and the supplies are here. And ultimately, they will move,” Chief Operating Officer Jim Teague told analysts. “It has a lot to do with the Brent and WTI spread. So I would expect that you’re going to continue to see volumes flow and we are pretty excited about the role we’re going to play.”
Still, Enterprise boosted exports of U.S. condensate to 40,000 barrels per day (bpd) after signing two annual contracts with Petro-Diamond Singapore and Vitol.
One contract had been concluded at a premium of more than $2 a barrel to WTI on a free-on-board basis, traders said.
“I think they got used to the high bids,” a Singapore-based trader said. “They should adjust their expectation if they really want to sell.” (Editing by Jason Neely and Jessica Resnick-Ault)