New twists in OPEC flows

Jan 9, 2018 10:01:26 AM EST

Last week, we discussed changing trends in Iraqi crude flows into AsiaTotal deliveries of OPEC crude to China rose last year by 300,000 bpd, as cartel members looked to keep one of its key growth markets well supplied.

Even though Iraqi deliveries into China reached the highest on our records in November at a million barrels per day, arrivals in 2017 were actually down versus the prior year, as Iraq shifted its focus towards India and the U.S. instead

While Iraqi deliveries to China edged lower versus 2016 volumes, other cartel members such as Angola, Venezuela, Kuwait and Libya all saw flows increase.  

Angola and Venezuela led the charge in terms of higher deliveries, as both nations continue to service their debts with China (via oil, as opposed to cash). A rebound in Libyan production meant more found its way to Chinese shores, while Saudi Arabia sent just a smidge more than it did in 2016, dialing back on exports elsewhere.

YoY OPEC to China.jpg

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It has been well documented that Saudi Arabia focused its export cuts in the second half of last year on the largest and most transparent global market - i.e., the U.S. - where it felt it would get the most bang for its buck. 
 
The drop in Saudi flows, in combination with lower Venezuelan deliveries (due to both lower production from the Latin American nation, as well as quality issues with its crude), has meant that OPEC deliveries to the U.S. were 72,000 bpd lower last year than in 2016. That equates to a drop of 26 million barrels year-on-year. 
 
Countering the drop in flows from Saudi, Venezuela and also Kuwait, we have seen stronger arrivals from Nigeria and Libya - as both boosted production last year - while deliveries from Iraq rose the most. They were up over 150,000 bpd on the prior year, averaging nearly 600,000 bpd in 2017. 
 
YoY OPEC to US.jpg
 
As we move into the second year of the OPEC production cut deal, Saudi Arabia is starting 2018 following a similar trend to Iraq, boosting flows to South Asia (think: India), while dialing back on its flows bound for East Asia (think: China, Japan, South Korea). East Asia is Saudi's largest market; it accounted for over 40 percent of its crude deliveries last year. 
 
Even though Chinese independent refiners have had their import quotas boosted for this year, rising demand out of India is rallying crude imports. Loadings bound for East Asia last month from Saudi Arabia dropped to a seven-month low, while grades bound for South Asia reached an eight-month high: 
 
Saudi crude to East and South Asia Jan 2018.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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