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Saudi Swinging

Aug 8, 2017 10:39:35 AM EST
By: Matt Smith

Rumors and murmurs suggest that Saudi is not only cutting exports again in September, but is choosing to swing these flows away from the east, and towards the west once more. Nonetheless, crude prices are still ticking lower on this eighth day of the eighth month. Hark, here are some OPEC observations to consider:

Angolan exports fell last month, despite its African cartel counterparts ramping up exports (think: Libya, Nigeria, Algeria & Gabon).

After an excess of Atlantic Basin crude available in recent months, strong demand for Angola's September loading plan is being reflected in improving differentials for grades such as Cabinda, Girassol and Kissanje. Some differentials have reached multi-year highs in recent weeks. 

China continues to be the leading destination for Angolan crude, and by a country mile, accounting for nearly 60 percent of barrels loaded in the first half of the year. India is in a distant, distant second place, not quite accounting for 10 percent of export loadings.

South Africa accounts for five percent, while Canada four. The US is ninth in the pecking order, but climbing, as it has pulled in increasing volumes in recent months:

Angola exports Jul 2017 ClipperData.jpg

Angola has been benefiting as Saudi Arabia has dialed back on exports, and based on news flow today, Saudi is going to continue keeping its exports in check in September.  We've discussed here recently how Saudi has been cutting flows to the U.S., but it seems the kingdom is looking to send less to Asia next month, with China set to feel the biggest pinch. Hence, the uptick in demand for Angolan barrels - and heading east to boot - makes all the more sense.  

Even though Asian deliveries from Saudi Arabia have dropped below year-ago levels for each of the last four months, total OPEC deliveries to Asia have been above year-ago levels for every month in the last year and a half, barring May:

OPEC to Asia Jul 2017.jpg

In my latest feature on NPR's Texas Standard, we discussed how crude imports to the U.S. are dropping from Saudi Arabia, yet U.S. exports of crude and products continue to climb. You can listen to the interview here, while here are five key takeaways:

 --Venezuelan exports are holding up for now, but other OPEC members, and particularly Saudi Arabia, are dialing back on deliveries to the U.S.

--Saudi has focused on reducing crude flows to the US, because U.S. data is the most transparent, timely, and reliable. This should boost bullish sentiment for oil.

--OPEC's ultimate goal is to draw down OECD inventories. The US accounts for ~45 percent of this total.

--The U.S. is exporting 6 million barrels per day of oil and products.

--U.S. exports of distillates (mostly diesel) have just reached a record of 1.6 million barrels per day in July. The U.S. also exports nearly a million barrels per day of oil, and of gasoline, and of propane / butane / ethane. 

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Last week we discussed how Libyan exports in July had climbed to multi-year highs. While the majority of Libya's (mostly) light sweet crude makes its way to Europe, which makes sense given its proximity, Libyan grades are heading further afield as export volumes ramp up. 

In terms of July deliveries, we have seen nine different grades discharged, with El Sharara leading the way, and cargoes arriving in six different countries outside of Europe. China has received Libyan crude for the past six consecutive months, while the U.S. is increasingly seeing a ramp up - climbing above 100,000 bpd in July. 

Libyan exports ex Europe.jpg

Finally, this article provides some great tidbits on the current lie of the land in Venezuela. It says that PdVSA expects its refining sector to operate at 44 percent of capacity in August, ticking lower on July by 1 percent amid ongoing outages - 7 out of 12 crude distillation units are out of service across the nation due to extended maintenance. The 187,000 bpd Puerta De La Cruz refinery is set to operate at 32 percent utilization. 

Venezuela and neighboring Curacao (which we discussed last week) can process up to 1.64 million barrels per day of crude. A silver lining for Venezuela comes with the potential restart of a crude distillation unit at its 335,000-bpd Isla refinery on Curacao. 

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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