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[LONDON] The price of a North Sea crude which underpins the Brent oil benchmark has fallen after a supertanker heading to South Korea unexpectedly turned back, leaving supply more ample, traders and analysts said.
In what analysts said is an unusual move, trading firm Vitol has been re-offering Forties crude from the Sea King, a Very Large Crude Carrier (VLCC) which had set off for South Korea from the UK about two weeks ago.
The move effectively increases supply in the backyard of the Brent benchmark, and price differentials of Forties crude and the outright price of Brent itself have weakened. Brent crude futures are trading below $50 a barrel, a six-month low.
"The Sea King is part of the reason Brent is sinking," said Olivier Jakob, oil analyst at Petromatrix. "This is not a usual move and does not bode well for North Sea crude oil that has been relying on shipments to Asia to clear the overhang that was visible during June."
Sea King was one of up to four VLCCs that traders initially thought was heading to South Korea in July. The Asian nation half a world away is a regular buyer of Forties as its crude imports from the European Union are tax-free under a free trade agreement.
The flow to Asia has helped boost Forties differentials and the wider Brent market in previous months as Forties is the largest of the four North Sea crude streams underpinning the global benchmark.
Vitol has sold two Forties parcels from the Sea King, which according to Reuters ship tracking software is off the coast of Portugal with Scapa Flow off the Scottish coast as its destination.
"I believe it is simply a case of re-optimising the crude and sending it elsewhere instead," said a trading source of Vitol's move.
Vitol said it does not comment on trading activity. The vessel's manager, Thenamaris, denied talk in the market that the ship stopped the voyage to Asia because of mechanical trouble.
"Sea King is awaiting charters' orders, and as per our corporate policy we do not comment on commercial matters associated with vessels under our management," Thenamaris said in an emailed response to questions. "The vessel is not suffering from any technical issues."