Kpler OIL (Saudi Arabia and Iraq exports)

Originally Released on 21 July 2017

Saudi Arabia and Iraq exports

Saudi Arabia is likely to reduce exports in July compared to June 2017. Kpler data currently indicates that Saudi exports could end July between 6,421 kbd and 7,100 kbd. While the variance of this range is quite wide, it still serves as an indication that exports might not increase compared to June assuming the higher end of the range and below May levels assuming the lower end of the range. The month of May saw the lowest export total since December 2015, according to Kpler data.

Saudi Arabia is particularly concerned regarding U.S. imports, due to the visibility of crude movements into the nation. U.S. imports of Saudi crude hit a 7-year historical low on a weekly-basis, according to EIA data. Kpler data shows a steep reduction of U.S. imports year-over-year and compared to an average of the last 3 years.

Furthermore, Saudi cuts to the United States will continue and possibly deepen further. Kpler data reveals that on July 20th, there are 15 VLCCs and 3 Suezmax vessels in transit to the U.S.

Saudi crude in transit to United States – July 20th

However, the Saudi strategy has been partially offset by increasing U.S. imports from Iraq which grew by 113 kbd (26%) in June 2017 compared to the same month a year earlier and will increase by 335 kbd (85%) year on year in July 2017, according to our predictive model. With that being said, the number of shipments headed from Iraq to the United States has significantly decreased over the last few weeks, as shown in the Kpler screenshot below. It is possible that Iraq could join the Saudi strategy to accelerate the rebalancing scenario.

Iraq crude in transit to United States – July 20th
Ecuador officially breaks the OPEC production agreement

On Tuesday, July 18th, Ecuador officially announced its intent to break the OPEC production agreement. While Ecuador only represented approximately 1.4% of the total OPEC production cut, it could serve as dangerous precedent for larger nations to break from the agreement. The Ecuadorian government cited fiscal constraints as a reason for the need to increase production. Kpler data reveals consistent monthly increases in Ecuadorian exports from 382 kbd in March to 435 kbd in June – a near 11% increase. These elevated production levels have not been seen since last June 2016.

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