Page 8 - MEOG Week 18

MEOG PIPeLInes & transPort MEOG
Saudi oil exports soar ahead of OPEC+ cuts
saudI arabIa
THE oil-price war that Saudi Arabia started last month may be over, but the effects are still rip- pling through the market.
The kingdom’s crude exports in April sky- rocketed to about 9.4mn barrels per day – the highest level in at least three years – due to soar- ing shipments to China, India and the US.
The surge, partly the result of Saudi Arabia slashing its official selling prices last month, comes just as OPEC+ production cuts are set to take effect in an effort to reduce the oil glut.
Observed shipments, which are preliminary and subject to revision, are at their largest vol- ume since tracking flows began at the beginning of 2017. They compare with exports of 7.4mn bpd in March. Ballooning Saudi crude exports had been expected since early last month, when the alliance between OPEC and a group of other nations initially fractured over their response to the unfolding coronavirus (COvID-19) pan- demic and collapse in demand.
State-run oil company Saudi Aramco then
cut prices for April to their lowest level in dec- ades, setting off a battle for market share.
That meant cheap crude for potential buyers. Saudi exports to China in April surged to 2.2mn bpd, while those to India rose to 1.1mn – both the highest level in at least three years. Flows to the US increased to 1mn bpd, the most since at least August 2018.
Those volumes could swell further, with ships carrying 14mn barrels yet to signal their final destinations. In addition, at least five supertank- ers laden with Saudi crude have been idling for at least a week off the coast of Egypt – an indication of possible floating storage.
For May, Aramco cut prices even further for some markets, notably Asia.
However, it is not clear whether April’s export boost will continue at the same rate next month. To help reduce the glut, the OPEC+ coalition put aside its differences and agreed to curb supply once again, starting on May 1. Saudi Arabia has pledged to limit its output to about 8.5mn bpd.™
Crude buyers cancel Saudi cargoes amid freight hike
saudI arabIa
US buyers of Saudi Arabian crude oil last week cancelled at least seven April-loading tank- ers after a jump in freight costs, two industry sources have said, and this is likely to result in lower-than-expected shipments from the world’s top exporter.
The move shows how some buyers are not rushing to take extra oil despite a slide in prices this month to below $16 a barrel, the lowest this century, as demand has collapsed following worldwide government measures to contain the spread of the coronavirus (COvID-19).
In March, Saudi Arabia reduced its official selling prices for April crude and vowed to boost exports after a supply cut deal by the Organiza- tion of the Petroleum Exporting Countries and rivals such as Russia collapsed.
But tanker rates soared and Saudi Arabia told buyers it would cut compensation payments for freight costs because of extraordinary conditions in the freight market.
Freight costs jumped globally because more ships were needed to deliver oil after Saudi Ara- bia and other Middle East producers ramped up
output after the talks to extend the OPEC-led production cut deal broke down at the start of March. This killed the economics of importing the extra barrels, one source said. “US refiners gave back at least seven vlCCs because the freight protection was lifted,” one of the sources, who spoke on condition of anonymity, said. “If they had got the freight protection, they would have taken these barrels.”
Saudi state oil company Aramco declined to comment. Even after the cancellations, the vol- ume of April-loading Saudi crude heading to the United States is still set to increase, the source said. Saudi exports to all destinations are pre- dicted to rise this month. The changes in supply terms were seen as likely to lead to cancellations of April cargoes by buyers across the world, as they were not expecting to bear transport costs in full. Iraq, OPEC’s second-biggest producer, also informed customers it was unable to com- pensate them for the jump in freight costs.
OPEC and other producers this month reached another supply cut deal to try to prop up oil prices, which took effect from May 1.™
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w w w . N E W S B A S E . c o m Week 18 06•May•2020