Saudi Swinging

Share on twitter
Share on linkedin

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