* Light-heavy crude price spread narrows
* Stronger demand for oil from U.S., UAE, Brazil, Nigeria
* Geopolitics cloud outlook for heavy oil supply
* Refiners may cut runs at delayed coker units
By Florence Tan
SINGAPORE, Sept 10 (Reuters) - Asian refiners are buyingmore light crude and trimming purchases of heavy oil, as theytweak production to meet rising demand for low-sulphur fuels inthe shipping sector.
Asia's demand for light, low sulphur crude grades, known assweet crude, produced by countries such as the United States,the United Arab Emirates, Brazil and Nigeria has strengthenedafter the price gap between light and heavy crude narrowed thisyear amid record U.S. shale production and tighter availabilityof heavy oil.
"The traded crude slate is getting lighter and sweeter. Atthe same time, expansion of the refining system is gearedtowards heavier crude," Vitol's Global Head of Research GiovanniSerio said at the Asia Pacific Petroleum Conference (APPEC).
"It's a real challenge that refineries are facing every dayand (will face) for the next few years."
Refiners globally have been building expensive secondaryunits that can further process the residual fuel oil left overfrom the initial refining of heavy oils into higher qualityproducts such as gasoline and diesel. The global shift towardslower sulphur fuel for ships from January was supposed to lowerheavy, high-sulphur crude prices and widen its price relative tolight oils but that has not happened.
Instead, U.S. sanctions on Iran and Venezuela combined withproduction quotas set by the Organization of the PetroleumExporting Countries have tightened heavy oil supply since thesecond quarter.
Saudi Arabia, the world's largest oil exporter, hascommitted all of its Arab Heavy crude production to termcustomers and it has a 400,000 barrels per day refinery at Jizanstarting up in the fourth quarter that will require more heavyoil supplies, a source familiar with the matter said.
Strong heavy crude prices have reduced the margins forsecondary units, prompting refiners to trim output at theseunits and process more light oil to produce low-sulphur fuel oilor marine gasoil to meet International Maritime Organization(IMO) specifications from January, refining sources said.
To produce IMO-compliant fuels, some refiners have increasedpurchases of light crude in the fourth quarter, underpinningspot premiums for grades such as Abu Dhabi's Murban crude, U.S.West Texas Intermediate (WTI) Midland and Brazilian Lula,according to several traders that participate in the market.
Japan's third-largest refiner Cosmo Oil is processing morelight crude to produce very low-sulphur fuel oil (VLSFO)although it will also buy more heavy crude for its delayed cokerunit at Sakai after an expansion, said Mitsuyasu Kawaguchi, thegeneral manager of its crude oil and tanker department.
"International supply of heavy crude is being decreasedbecause of sanctions … so we see some challenges in how muchheavy crude we're going to term up and what's the game plan forthe light side," he said.
South Korean refiners have also increased light crudeimports from the United States to boost VLSFO supplies.
"We're increasing the use of WTI and WTL (West Texas Light)to produce VLSFO," said a South Korean refining source whodeclined to be identified because he is not authorised to speakto media.
"Using those grades is easier to produce VLSFO because wecan make it without going through conversion units."
State-owned refiner ChemChina has also increased its Murbancrude purchases over the past two months, buying at least 2million barrels per month, offsetting imports of comparativeheavier grade Upper Zakum, said several traders that participatein the market.(Reporting by Florence Tan, Jane Chung and Shu Zhang; editingby Christian Schmollinger)