US crude exports to Asia are grinding to a halt just four months after they began, in a sign of how an aggressive strategy by Gulf producers to defend their market share is starting to bear fruit.
Asian refiners have suspended imports of US condensate, a light crude oil, as they turn to cheaper and abundant Middle East oil, Reuters reported.
"There's so much oversupply that Middle East crudes are now trading at discounts and it is not economical to bring over crudes from the US anymore," said Tushar Tarun Bansal of consultancy FGE in Singapore.
US oil became uncompetitive against similar grades from Qatar, Saudi Arabia and the United Arab Emirates after Persian Gulf producers began dropping prices in August to maintain their market share in an oil market glut. Crude oil prices have fallen more than 40 percent since June and the market tumbled further last week after OPEC decided at a meeting in Vienna against cutting output in order to support market share instead of prices.
Middle East crude currently accounts for about two-thirds of Asia's imports.
Adding to pressure on US crude exports to Asia, freight rates from the United States to Asia have risen by 50 percent, forcing sellers to market their cargoes to Europe instead. This is partly due to higher demand for ships in the Middle East and Africa.
The United States eased a 40-year-old ban on crude exports last year in the wake of its shale oil boom, opening up new trade routes for surplus flows to Asia and Europe this year.
The pressure could undermine plans to send further US condensate to Asia.
