Bringing Home the Bagels

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In keeping with PETA’s recent announcement to remove speciesism, OPEC has ironed out the details of a production cut (the sequel), with higher prices meaning they will ultimately be ‘bringing home the bagels’.

Saudi Arabia has already taken the bull by the horns the flower by the thorns, dialing back flows to the U.S., in an effort to get the most bang for its buck: cutting barrels to the largest and most transparent market to lower inventories and boost bullish sentiment.

While this impact is yet to be felt – Saudi deliveries to the U.S. in November were still at 1 million barrels per day (although set to imminently drop) – we are seeing a change in behavior in flows to the affiliate of Saudi Aramco: Motiva Enterprise’s Port Arthur refinery.

Typically, Motiva is able to kill two birds with one stone to feed two birds with one scone by owning the largest refinery in the U.S.: it is able to guarantee supply of the Arab Light and Arab Medium the refinery needs, while also providing a guaranteed destination for Saudi barrels.

ClipperView Jan 2019

We highlighted last year how Iraqi deliveries surpassed Saudi volumes to Port Arthur as Saudi throttled back on barrels to North America. We’ve seen them rebounding again this year, accounting for well over 80 percent of imports. After no deliveries in at least a half a decade, Canadian crude has been delivered in six of the last eight months, and various grades: Cold Lake, Hebron and Western Dilbit Crude.

But as Saudi arrivals are about to take a nosedive, we have see the first Iraqi crude discharged at Port Arthur since April – the only two deliveries this year. This has been swiftly followed by a delivery of Basrah Light on Monday from storage in the Caribbean. The first Venezuelan cargo in five months arrived in November. It seems Motiva is diversifying its crude supply amid Saudi barrels dropping to their lowest since February: 

Motiva Port Arthur imports ClipperData

While Saudi is now dialing back flows to the U.S., Iraq has already done so in the last six months, choosing instead to push on for market share in Asia. But as Iran has cut back on deliveries into southern Europe, Iraq has been the guinea pig been the test tube, as it experiments with becoming a bigger supplier to the likes of  Greece, Italy and Spain:

Iraq crude to southern europe ClipperData

We discussed last week how there is a tidal wave of crude heading towards East Asia, and this is in part driven by a recent ramp up in deliveries of Saudi Arabian and Iraqi crude into China – where it looks like suppliers are flogging a dead horse feeding a fed horse. 

While Iraqi barrels to the U.S. have slowed, both Saudi and Iraq continue to jostle for market share in India as Iranian supplies wane. Saudi has stepped up in November to boost deliveries to India to their highest monthly level this year, surpassing Iraqi flows for only the second time:

India imports of Saudi Iraq crude-1