Come on in, the water is fine!

Jul 26, 2017 12:44:32 PM EST

It's good to see Saudi Oil Minister Khalid Al-Falih jumping on the tanker-tracking train (well, you know what I mean), highlighting that participants in the OPEC / NOPEC production cut deal need to reconcile production with exports, and that oil exports are now the key metric to monitor. (Come on in, the water is fine!).

A proposal by Kuwait to monitor crude exports was dismissed back in January, but it seems the OPEC / NOPEC joint ministerial committee is ready to pitch this idea again, given the glaring disparity betwixt output and exports.

Looking at OPEC / NOPEC's compliance on the whole, it is understandable why Al-Falih is drawing attention to flows - OPEC exports remain elevated, holding above October's reference level again this month. It is also understandable why there is so much focus on rising Nigerian and Libyan production. Our ClipperData show this rise is concurrently translating into higher exports, offsetting Saudi export cuts:

 

Saudi Nigeria Libya ClipperData July 2017.jpg

There is, however, trouble abrewin' in Nigeria, with the closure by Shell of the Trans Niger pipeline, amid a suspicious pipeline leak

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As Khalid Al-Falih draws attention to falling Saudi crude exports to the U.S. - knowing that this drop will be seen given the transparency of the U.S. market - Saudi appears to be losing market share elsewhere.

As Chinese crude imports continue to rise, Saudi exports continue to tread water on a year-over-year basis. This is leaving other producers, such as Brazil and the UK to step up and meet this need. The U.S. is also growing in prominence. 

crude to China 2017.jpg

From one OPEC dilemma to another, and the U.S. has just announced sanctions on 13 senior officials of Venezuela's government. This raises the potential of sanctions escalating - ultimately to a U.S. oil embargo.

In my latest feature on NPR's Texas Standard, we discussed the implications of possible sanctions on Venezuela for the Texas economy - and how a U.S. oil embargo is unlikely. The interview can be found here.

In terms of crude flows, Venezuela has sent ~700,000 bpd of crude to the U.S. so far this year, with the vast majority going to the Gulf Coast - Texas and Louisiana. The leading destinations, as you would expect, are Citgo - PdVSA's subsidiary - and its Lake Charles and Corpus Christi refineries.

But there are a number of other key recipients, such as Valero's Port Arthur and Chevron's Pascagoula refineries. As our ClipperData illustrate below, these four destinations account for over half of the ~700kbd of Venezuelan crude that is heading into the U.S. Gulf. 

Venezuela crude to US ClipperData July 2017.jpg

About the Author

Matt Smith

deciphers and distills what is most relevant across the energy complex into cohesive and pithy knowledge you can use. The belly laugh is a bonus.

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