The inventory of heavy oil (oil with high density used for producing diesel, gasoline, and other products) in North and South America has significantly increased. While the price of Brent oil, the global benchmark, has risen above $100 per barrel, market conditions are not favorable for heavy exporters.
Challenges of Transporting Heavy Oil
Recently, competition for oil supply in Asia and Europe has increased, but shipping rates for oil tankers have surged due to tensions arising from the U.S.-Iran war. This has made heavy oil exports from the American continent more difficult. Currently, while oil supply in the American continent has increased, additional processing capacity in refineries is limited, leading to inventory buildup.
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High Transportation Costs and Their Impact on Prices
According to an energy analyst, the cost of transporting oil to Asia has reached $40 per barrel. Last week, the shipping cost of oil from North America to Asia for a large oil tanker reached $80 million (equivalent to 107.5 billion South Korean won), which means $40 per barrel, and this figure is more than five times the initial costs of the year.
Similarly, transportation costs to Europe have also increased. The cost of transporting oil from the Gulf Coast of the U.S. to Europe has reached about $46 million (equivalent to 61.4 billion South Korean won), meaning $24.50 per barrel, which is seven times the costs before the war began.
Despite the decrease in heavy oil prices in the U.S., global oil prices remain high. According to a pricing agency, the price of key heavy oil from Canada, Colombia, and Ecuador has dropped by more than $10 per barrel, reaching the lowest level in the past six weeks.
While heavy oil supply in North America has increased, there has been no significant increase in refinery capacity. Reports indicate that the average utilization rate of U.S. refineries is currently 93.5%, the highest level in the past 28 years.
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