Kpler OIL (Market Update)

Saudi seaborne exports are pointing to yet another month at or near the 7,000 kbd loading level, keeping to the export limit set out by the Oil Ministry in January of this year. Through the first three weeks of May, loadings have averaged near 7,200 kbd and preliminary May seaborne export loadings for Saudi are currently holding at 7,089 kbd. Of the monthly total, 2,235 kbd has already been delivered, with another 4,103 kbd in transit, and an additional 475 kbd being loaded at port. The biggest downside risk for Saudi export totals include scheduled loadings, currently equal to 276 kbd. Scheduled loadings are sometimes partially or fully rolled over if associated vessel(s) are unable to load and depart from a port before the end of the current month. The figures reported above are subject to small revisions through the end of the month as more data becomes available.

Through much of 2018, the focus has centered on Saudi compliance with their own self-mandated 7,000 kbd export level. The focus now shifts to the willingness of Saudi Arabia, alongside other OPEC partners and Russia, to begin boosting production and export levels given the stark loss of Venezuelan barrels over the past year and the coming re-implementation of U.S. economic sanctions on Iran. Indeed, over the past 12-months, Saudi Arabia has managed to hold the weekly export average remarkably close to 7,000 kbd. If a change in policy is decided upon at the OPEC meeting next month, it is likely that an increase in Saudi loadings will gradually move higher to allow global markets to slowly absorb the changes. For now, we remain in a wait-and-see attitude.

 

Kpler OIL (Market Update)

2018 has been a year of rapid increase for U.S. oil production and exportation. In April alone, a total 1,599 kbd departed from the United States towards foreign destinations, the second highest monthly amount in at least the past decade. The rise in U.S. exports has brought with it new global trade flows, one of which includes Condensate moving from Corpus Christi to the ADNOC Ruwais Refinery complex. Aramco Trading Company has played a pivotal role, chartering at least two vessels since March. SK Corporationalso chartered a vessel in early February. In total, five vessels have departed towards the UAE this year:

  1. Aframax Minerva Clara – originally loaded approximately 702,000 barrels of Condensate on January 1st at the Corpus Christi Public Oil Dock before discharging her load at Ruwais Refinery on February 10th.
  2. Suezmax Nordic Pollux – originally loaded approximately 995,300 barrels of Condensate on February 6th at the Corpus Christi Public Oil Dock before discharging her load at Ruwais Refinery on March 16th.
  3. Suezmax Astra – originally loaded approximately two 500,000-barrel Condensate lots, the first at Buckeye Texas Hub on March 30th and the second through an STS transfer with the Eagle Texas at the Corpus Christi lightering zone on April 4th before discharging her entire load at Ruwais Refinery on May 9th.
  4. Aframax Laurel – originally loaded approximately 650,000 barrels of Condensate at the Corpus Christi Public Oil Dock on April 13th. AIS signaling has her arriving at the UAE on May 27th.
  5. Suezmax South Sea – originally loaded approximately two 500,000-barrel Condensate lots, the first through an STS transfer with the Eagle Kinabalu on May 10th and the second at Buckeye Texas Hub on May 14th. AIS signaling has her arriving at the UAE on June 19th.

Kpler OIL (Interesting Moves)

Iranian seaborne exports pushed new highs in April, finishing at a sizable 2,760 kbd, higher 209 kbd m/m and 535 kbd y/y. Shipments towards India realized the largest m/m increase at 121 kbd to end April at 604 kbd, with additional export volumes to China (740 kbd), South Korea (257 kbd), Italy (175 kbd) and France(103 kbd). Following a gap in loadings for the month of March, flows towards Japan also resumed in April, ending at 218 kbd, marking a return to February levels.

South Pars Condensate loadings finished the month at 261 kbd, lower 80 kbd m/m. Late last week, we indicated the possibility that condensate exports could finish higher m/m contingent on the VLCCs Yuan Chun Hu and Dover. In the end, the Yuan Chun Hu ended up co-loading 1.58 million barrels of normal Iranian crude alongside 252,000 barrels of South Pars Condensate. The Dover was unable to load at all in April. In total, Condensate shipments to South Korea dominated at 142 kbd, while additional volumes were shipped towards the UAE (77 kbd), Japan (23 kbd) and China (8 kbd). There remains an additional 10 kbd that loaded in April aboard the Helen M that has yet to signal a destination.

Exports departing from Kharg Island continue to stage a comeback, ending the month of April at 2,170 kbd, an increase of nearly 500 kbd since shipments bottomed out in January. Kharg Island has been the key point for driving marginal monthly changes in seaborne loadings for Iran so far through 2018. Small crude volumes also departed from Sirri (95 kbd), Soroosh (82 kbd) and Lavan (24 kbd) among others.

The overall strength in Iranian shipments for April was driven in part by two things. First, Iranian short-term floating storage, which built to just over 4 million barrels through mid-April fell to nil through the end of the month. The decrease was driven by the VLCCs Dan and Deep Sea, both of which discharged their respective loads through ship-to-ship transfer after sitting idle since early-March. Iranian refinery maintenance also ticked higher in April, freeing up additional crude volumes for export.

Kpler OIL (Market Update)

India receives their first ever FSRU in Jaigarh

Engie’s GDF Suez Cape Ann departed from Tianjin 6-Jan-2018, where the vessel was previously stationed, according to a charter agreement with CNOOC since 2013. She arrived offshore Jaigarh 27-Apr, where the vessel was delivered to H-Energy. ENGIE and H-Energy have signed a charter agreement with a minimum duration of 5 years, starting in 2018.

The new installation will have an initial capacity of 4.0 mtpa during phase 1 and is also able to reload LNG onto other vessels. During phase 2, the installation is expected to increase capacity to a total of 8 mtpa.

H-Energy has also signed a joint venture agreement with K-Line for a second FSRU in West Bengal. The project is planned to commence operations in 2020, with K-Line delivering the FSRU for the project.

Kpler OIL (Interesting Moves)

Floating Storage Declines

Trump’s stated earlier today via Twitter that “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”

While it remains unclear the metric Donald Trump is referring to in his tweet, our data does not suggest any recent builds in global floating storage volumes. Kpler long-term floating storage, which defines crude stored on vessels for more than 30 days, is currently at levels below 8 million barrels, according to the 10-day moving average. Even the Aframax Delta Pioneer, which had been storing Urals in the Baltics since April 20th, 2016, recently delivered to Mongstad.

Furthermore, there has been no evidence of floating storage builds in the Middle Eastern region. Even near Iran, where the possibility of a breakdown of the JCPOA (the Iran nuclear deal) has not had any noticeable effect on long-term floating storage. Only one VLCC, the Deep Sea, has been idled close to Kharg Island since February 26th.

Oil-on-water, which includes a summation of floating storage and oil-in-transit, realized a decrease of more than 80+ million barrels through Q1 2018 with much of this decline a result of seasonal refinery maintenance. Of course, there were significant builds in short-term floating storage off the coast of China through the month of March, but this was largely a result of port congestion and not necessarily a direct function of OPEC action. Floating storage volumes near China have rapidly declined over the past 2-weeks.

Kpler (OIL) Interesting Moves

Brazilian Exports Spike in March

For the first time in three months, Brazilian seaborne exports managed an increase, spiking to 1,222 kbd, higher by a whopping 270 kbd m/m and 331 kbd y/y. The rise in exports was partially driven by higher shipments leaving Angra Dos Reis, which were up 131 kbd to end the month at 430 kbd.

Brazilian production remains in central focus as one of only a few non-OPEC countries, alongside the United States and Canada, that can significantly increase global production capacity growth over the next several years. So far through 2018, total seaborne exports have been largely inconsistent declining from a massive 1,359 kbd total in December of last year down to just 952 kbd in February before spiking again in March. If Brazil wants to become a dominant global producer, export stability is key, especially to places like China, which depend on a steady stream of Brazilian crude oil.

The exploration and production of Brazil’s pre-salt offshore blocks are a vital piece in improving Brazil’s export capacity moving forward. Last week, BP, Shell, Statoil and Wintershall, among others, were all big players in the offshore auction that saw 22 blocks successfully sold, raising USD2.4 billion. Exxon Mobil was the biggest winner, taking controlling stakes of two blocks in both the Santos Basin and Sergipe-Alagoas Basin and an additional four blocs within the Campos Basin. Wintershall was particularly aggressive in the Potiguar Basin, taking control of three blocks within that particular area.

 

March Iraqi Maintenance Pulls Down on Exports

After a strong two months to begin the year, Iraqi southern exports realized a moderate 171 kbd m/m decline to finish March at 3,461 kbd, a first under 3,500 kbd since last October. The decline was largely expected following an announcement from SOMO (The State Organization for Marketing Oil) that exports would not exceed 3,426 kbd in March. Much of the decrease was a result of maintenance at the SPM 1 berth, which is part of the offshore Al Basrah Oil Terminal. SPM 1 has not seen any vessels enter the berth since February 27th. Maintenance operations should be completed at some point this month.

Oil exports from northern Iraq remain largely in flux. The main export avenue for crude produced in the Kirkuk region remains along the KRG controlled pipeline that extends to the Ceyhan port complex in southern Turkey.  The problem is that the largest producing fields (Bai Hassan, Avana, Baba Dome) were reclaimed by Baghdad in October of last year after fighting broke out with the KRG and yet, there remains no clear agreement in place between the two governmental entities. This has created a situation where Baghdad has sought new short- term solutions to evacuate crude production from the region, including an oil-swap with Iran that has faced delays due to security concerns along the Iranian border. Kirkuk export flows out of Ceyhan finished March at 310 kbd, down 90 kbd m/m and slightly below the Q1 2018 average export level.

Surging U.S. Seaborne Exports March

U.S. seaborne exports surged to 1,863 kbd for week-ending 3/30/2018, marking the second highest weekly value in 2018 and the fourth highest volume of all time. Even among escalating rhetoric between the United States and China over tariffs and other trade restrictions, 459 kbd of U.S. crude flowed towards the East-Asian nation-state, marking a fourth straight week of 200+ kbd shipment levels. China has slowly become an important purchaser of U.S. crude since the ramp in exports began last October. The United States also shipped crude to the United Kingdom (269 kbd) and Italy (164 kbd) among others. A 500,000 bbl shipment of crude departed towards Colombia for the first time since early February.

The surge in weekly exports tends to align with U.S. inventories, which drew by 4.62 million barrels. The draw was a distinct flip w/w as the 1.64-million-barrel build in week-ending 3/23/2018 was largely the result of seaborne imports finishing at 4,537 kbd, higher by a whopping 996 kbd w/w. Looking forward to April, U.S. atmospheric crude distillation maintenance is expected to expand in PADD 1 (125 kbd), PADD 4 (44 kbd) and PADD 5 (195 kbd) while falling in PADD 2 (206 kbd) and PADD 3 (276 kbd).

Over the past several weeks, China and the United States have escalated rhetoric regarding tariffs on goods flowing between the two nation-states. Both countries have floated proposals listing products that could face duties, although no actual policy has yet been implemented. For now, it appears the Chinese have excluded crude oil from the list of U.S. items that could face import taxes, instead focusing on chemicals and inputs/outputs of plastics production.

Kpler OIL (Live Market Update)

  • OPEC March exports dropped by 361 kbd m/m led by Libya, Iraq, Angola and Algeria declines.
  • Flows tended to shift away from Asia in March. Much of the marginal change came from a flip in flows from East to West of the Suez for crude originating in Angola, Iran and Iraq.
  • Libya battled disruptions across much of the nation-states western production and exportation areas in March.
  • Exports leaving Iraq through the Persian Gulf dropped in March largely due to maintenance operations at the SPM 1 berth that has prevented ship loadings at the terminal since February 27th.
  • Saudi loadings hit a three-month high in March, but the Q1 loading average remained nearly in line with Oil Ministry expectations.
  • Venezuelan oil export volumes remain at levels not seen in more than 15 years.
  • Nigerian flows decreased by 96 kbd m/m, the first such decline in 6 months.