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OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

(Bloomberg) -- Crude supplies from OPEC’s Middle East exporters, excluding Iran, soared in April to their highest level since at least January 2017. The surge came as Saudi Arabia and the United Arab Emirates abandoned restraint and boosted production after OPEC and its allies failed to agree on deepening output cuts in early March.

Saudi Arabia, Iraq, Kuwait and the U.A.E., which together account for about 70% of the Organization of Petroleum Exporting Countries’ entire production, together shipped an average of 18.9 million barrels a day of crude and condensate last month, tanker-tracking data compiled by Bloomberg show. That was an increase of 2 million barrels a day from revised March levels.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Saudi shipments in April rose by 1.95 million barrels a day, or 26%, from their March level, averaging 9.36 million. That was the most the kingdom has ever exported on a monthly average basis and was prompted by the collapse of the OPEC+ alliance, which failed to secure Russia’s participation in deeper curbs. Flows from the country’s Yanbu terminal on its Red Sea coast rose by about 36% to 1.53 million barrels a day, with shipments continuing to go into storage tanks on Egypt’s Mediterranean coast.

Exports from the U.A.E. also rose in April, as the country followed Saudi Arabia in boosting production. Shipments exceeded 3.5 million barrels a day of crude and condensate, an increase of 250,000 barrels a day, or 8%, from March.

The region’s other two producers were not able to boost exports. Iraq’s shipments fell month on month by 170,000 barrels a day, to their lowest level in three months, as crude sales to India plunged. Exports fell from both the country’s southern Basra Oil Terminal and the northern export route through Ceyhan in Turkey.

Flows from Kuwait also edged lower month-on-month, dropping by 28,000 barrels a day, or 1%, from the daily average level seen in March. A jump in sales to China, which were up by 146,000 barrels a day, was more than offset by lower shipments to India, Japan and South Korea.

Observed flows from Iran have been excluded, as tankers leaving the country often only appear in tracking data several weeks later, once they have reached choke-points like the Strait of Malacca or the Suez Canal, making early assessments of flows from the country less reliable. Signals from six tankers carrying an estimated 10 million barrels of Iranian crude or condensate appeared during April. The time and position at which the ships appeared suggest that most of them departed Iran in March.

With nearly 43 million barrels of oil on ships from OPEC’s Middle East exporters yet to signal a final destination, estimates of flows to individual countries are subject to revision.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Aggregate Persian Gulf crude flows to India, the closest major market, edged lower in April. Aggressive pricing by Saudi Arabia saw it boost flows by 46% to their highest level since at least the beginning of 2017, while shipments from Iraq were squeezed to their lowest in almost two years. India’s oil refiners are taking advantage of cheap Saudi crude to bulk up stockpiles even as the nation’s onshore storage tanks fill to the brim.

Flows to the U.S. remained elevated in April, with initial vessel destination data indicating a combined flow of over 1 million barrels a day from Saudi Arabia and the first shipment from the U.A.E. since August 2018. Those flows could change, though, if steps are taken by the U.S. administration to discourage imports of Saudi crude. A voyage time of about six weeks to both the East and West Coasts of the U.S. means that actual flows often don’t become apparent for several weeks after loading.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Observed shipments from Persian Gulf OPEC countries, excluding Iran, to China soared in April, rising to an unprecedented 4.76 million barrels a day, as shipments from Saudi Arabia and Iraq both surged to their highest levels since Bloomberg began tracking the flows in detail at the beginning of 2017.

China, the first country to impose lockdowns to combat the Covid-19 pandemic, is also the first to begin to emerge from the restrictions. A combination of the recovery in economic activity and the availability of cheap crude for storage has spurred Chinese buying. Huge cuts to official selling prices of Persian Gulf OPEC crude grades for April saw Saudi Arabia cut its Arab Light and Arab Medium grades to their lowest ever levels against the regional benchmark Oman/Dubai average. That helped to keep flows competitive.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Shipments from the region to Japan appear to have slumped in April after edging up in March. Flows to Japan from all four Persian Gulf OPEC countries were down month on month, bringing total shipments from the region to their lowest level in almost two years. JXTG plans to shut the sole crude distillation unit at its Oita refinery in western Japan from mid-May to early-July for regular maintenance, the time when April-loading cargoes from the Persian Gulf would begin to arrive.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Flows to South Korea, the other big Asian buyer of Persian Gulf crude, rose by 200,000 barrels a day, or 13%, in April, reaching their highest level in five months. The biggest increase in both volume and percentage terms came from Iraq, where shipments increased by 242,000 barrels a day, or 130%. The surge comes even as South Korea runs out of onland storage space that can be leased to third-party companies.

OPEC Middle East Oil Flows Surged in April as Saudis Opened Taps

Note: The figures above include exports from northern Iraq via Ceyhan in Turkey and outflows from the U.A.E.’s Indian Ocean coast and from Saudi Arabian Red Sea ports. They include crude and condensates, a light form of oil extracted from gas fields. Figures for flows to individual destinations are subject to change, especially when ships pass transit points like Singapore and the Suez Canal.

  • Bloomberg Terminal users can click on NI TANTRA for all tanker tracking stories, ALLX CUAG for tickerized data for Persian Gulf OPEC flows, and LINE GBLCRUDE for an overview of Bloomberg tanker tracking.

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