At the good ship Clipper, we like to look at flows from two perspectives: sinks and sources. The sources are the main origins of the flows: The key exporting regions such as the Middle East, Latin America and West Africa. As for the sinks, they are key regions to which these barrels drain into.
Asia continues to be an ever-growing sink for global crude flows, with waterborne discharge in the region clocking in at around 25 million barrels per day. While much has been made of rising U.S. crude exports into Asia of late, other regions in the Atlantic Basin have shown pockets of strength in the last year.
Deliveries to Asia from the North Sea, the U.S. and West Africa averaged just under 3 million barrels per day in 2017, up by over a quarter on the prior year's volume.
Part of last year's strength was to do with the ramp up in the availability of U.S. crude, egged on by rising domestic production, while another piece of the puzzle was the narrowing spread betwixt Brent and the Dubai/Oman benchmark amid the OPEC production cut - making North Sea crude a more attractive proposition. A similar trend for WTI-Dubai/Oman helped boost U.S. flows.
Strength has continued this year, with deliveries to Asia from the three sources climbing above 3.5 million barrels per day again in January, for only the second time on our records.
While Nigeria and Angola continue to be the behemoths of West Africa in terms of production and exports, it has been loadings out of Congo (Brazzaville) to Asia which have provided the majority of the increase in flows from the region last year. The vast majority of exports are medium sweet Djeno blend, but there has also been exports of Azurite and Yombo (hark, heavy sour crude that we recently discussed here).
While some West African exporting nations are on the up, Angola looks set to face headwinds in the years ahead, given how production at its deep-water fields peaks swiftly, then declines thereafter.
This would be a lesser concern if there were a consistent stream of new oil fields coming online, but instead we have seen lesser activity in recent years amid the lower oil price environment (highlighted by the rig count dropping to just 1, from a peak of 18 in 2014). Hark, waning production streams:
These production trends are affirmed by our ClipperData. The Olombendo crude stream sees sporadic exports, as does Sangos, while similar to the chart above, Clov exports are holding up just fine. But as for the older crude streams of medium sweet Pazflor and medium sour Saturno, both have indeed started their descent, affirming lower output: