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I Drink Your Milkshake!

Aug 24, 2018 12:17:11 PM EST

The splendidly-directed movie 'There Will Be Blood' by P.T. Anderson is about the early days of the oil boom.

There is an epic scene between actors Daniel Day Lewis and Paul Dano, in which Daniel Day Lewis says: 'I DRINK YOUR MILKSHAKE!'. 

This is a century-old hat-tip to directional oil drilling, as Daniel Day Lewis' character has used slant drilling to drain an oil reservoir under an adjacent piece of land. 

This is a somewhat poignant turn of phrase at the moment, given that Iran is about to have oil sanctions applied on it, and everyone is jostling to drink their milkshake - stealing their market share as their production and exports drop back. 

IDRM

We recently highlighted how Iraq appeared to be muscling in on Iran's market share into Northwest Europe based on our projections, and this is now playing out in delivered barrels. Iran has delivered absolutely nothing-nada-nil into France or the Netherlands this month, when it is typically a regular supplier. Based on our projections, nothing is set to be discharged in the coming weeks. 

Iraq, on the other hand, has already delivered over 7 million barrels to these two countries so far in August, higher than any monthly volume in the last year - and we still have a week of the month left to go. Two million barrels of Basrah Light have been discharged in France, hot on the heels of two deliveries totaling 2mn bbls last month - after a six-month absence.

Iran Iraq oil exports into France NetherlandsBut Iran isn't having Iraq drinking its milkshake everywhere. If we look at deliveries into Southern Europe and the Eastern Mediterranean this month, it is still holding its own versus Iraqi grades. This is a result of record volumes into Italy, as well as flows into Spain and Turkey continuing apace. 

Iran Iraq oil to Southern Europe
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Asia is also shaping up as a key battleground, and Iran is getting trounced in India, given that companies such as Reliance Industries are keen to keep good relations with the United States and halt Iranian imports. (In an interesting twist of fate, deliveries of US grades to India have reached a record so far this month).

According to our ClipperData projections, crude loadings this month bound for India (of which 90 percent has already been delivered) have risen by over 200,000 bpd from Iraq, while dropping by nearly 600,000 bpd from Iran - down by three-quarters on the prior month.   

Iran Iraq exports to India ClipperData

But it isn't only India that is seeing a dramatic change in flows - and it isn't only Iraq that has a milkshake craving.

Core OPEC (Saudi, UAE, Kuwait) loadings bound for Asia this month are up over 800,000 bpd versus July, while Iran's loadings are down nearly 700,000 bpd. As Iran's absolute loadings drop, it is having to cede its Asian market share, and other OPEC members are more than happy to suck it up. 

Core OPEC vs Iran oil exports to Asia ClipperData

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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