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Asian Petroleum Review : Jan-March 2011
17 Refined oil stocks held by China's two biggest oil companies have fallen in eight consecutive months, and diesel stocks plunged 14 percent last month alone, a Chinese industry official told Reuters on Monday. The cost of chartering tankers has risen, even as one trend that was lifting tanker demand has nearly disappeared. During the 2009 glut, major oil traders parked over 100 million barrels of crude in offshore ships to profit from a steep market contango, when oil for delivery further out is priced higher than prompt oil. The contango continues, but crude stocks held at sea fell by as much as 90 percent from record levels last year, said George Los of shipbrokers CR Weber in Connecticut. Refined or "clean" fuel products held at sea globally fell more than 25 percent in the month period through mid-November, shipbroker ICAP said. Stocks have also been shrinking at the onshore oil hub of Cushing, Oklahoma, where U.S. oil futures are delivered. They fell 11 percent from a record 37.9 million barrels in May. Recent French port and refinery strikes cut fuel stocks in Europe, lifting demand for U.S. exports of diesel. U.S. distillate demand is up by double- digits this month versus year-ago levels, and crack spreads - - a refiner's profits from making distillates - - are above $14 a barrel. That's far from a 2008 peak over $30, but quadruple the lows reached in 2009. ASIA COMPETES FOR BARRELS In Asia, gas oil crack spreads, or the fuel's pre- mium over crude oil, neared $15 a barrel last week, the widest in 22 months. Refiners in China, Japan, India and South Korea were competing for January-loading crude from ports in Abu Dhabi, Malaysia, Russia and elsewhere. That sent Middle Eastern Gulf crudes like Murban to their highest premiums of the year, while Ma- laysia's Petronas priced light Tapis crude for January near $90 a barrel, a record premium to benchmark crude. China accounts so heavily for new demand that its consumption patterns and policies are now central for market watchers. World oil prices have been falling since mid-November as China bat- tles its highest inflation rate in 25 months with monetary policy aimed at slowing growth. China may surprise oil markets in 2011 with plans to rely more heavily on natural gas, renewable fuels and nuclear power over the next five years, Bernstein analysts said last week. Diesel demand may slow in China if recent gov- ernment-mandated power cuts end, since they brought more small diesel generators into action. Thomson Reuters Asia Petroleum Review Oil tankers at daybreak at the Bajo Grande Terminal in Maracaibo. REUTERS/Raquel Chavez "The tighter oil market may help oil prices break away from the correlations we've seem them trading in" - Macquarie's Stuart