Reuters reported that the shutdown in Sudanese oil supply could drive up already record premiums on spot crude markets as top Sudan customers China and Japan scramble for alternatives even as they weigh the impact on oil flows of international sanctions on Iran.

South Sudan has shut down its oil output, estimated at around 350,000 barrels per day as it and neighbor Sudan row over how to disentangle their oil industries, borders and debt.

According to Chinese customs data, before the shutdown, China imported most of that volume bringing in around 260,000 barrels per day in 2011. That loss in addition to cuts China has made in imports from Iran as Beijing and Tehran bicker over contract terms has left China looking for alternatives equivalent to around 10% of its imports or around 545,000.

Mr Victor Shum senior partner at oil consultancy Purvin & Gertz said that “It will be a challenge to try to meet the shortfall in supply due to this sudden disruption as the overall quantity is not really that small. Overall this is a tighter supply situation for Asian refiners.”

The regional spot market is unlikely to provide much relief because of limited availability due to a spurt in demand from Japan for power generation after a devastating earthquake crippled nuclear facilities last year.

The supply disruption has added to the rally, boosting spot premiums for March to a record. It could drive prices even higher although any rise may be tempered by refinery maintenance in the Q2.

The shutdown by South Sudan in protest has cut off supplies to equity holders China National Petroleum Corporation, Malaysia’s Petronas and India’s Oil & Natural Gas Corporation.

An official with one of the equity holders said that “We expect some disruption in loading schedules with the production shutdown. We hope for a resolution soon.”

(Sourced from Reuters)