Asia Buys up African, Brazilian Oil as Shipping Costs Fall

Asia has been acquiring oil from Africa and Brazil at reduced prices due to a decline in shipping costs, according to traders, shipbrokers, and analysts. Unipec, a trading arm of global refiner Sinopec, purchased some African cargoes last week and chartered vessels at lower rates to load West African crude in December. Sinopec and SK Energy, South Korea's largest refiner, have also provisionally chartered tankers to load West African crude for Asian ports.

Softer long-haul VLCC freight rates have made west of Suez grades more appealing, as elevated premiums for Russian ESPO crude support Chinese demand for heavier Angolan grades. The sharp correction in freight rates occurred after Asia's oil costs surged last month due to record tanker freight rates, Chinese independent refiners switching to non-sanctioned oil, and their rush to use up crude import quotas by year-end.

However, Asian refiners held back purchases due to high costs, causing spot prices to depreciate, while more vessels are available for hire after delivering oil, leading to a significant drop in freight rates.