OPEC Middle East Oil Flows Edge Higher on Easing of Output Cuts

Oil exports from OPEC’s Middle East producers rose in July after Saudi Arabia and key Persian Gulf allies reversed the voluntary production cuts they had made the previous month. The figures excludes Iran.

Kuwait and the United Arab Emirates led the gain in last month’s oil supplies to international markets, with Saudi Arabia increasing less quickly and Iraq barely changed. Saudi producers boosted shipments by 190,000 barrels a day, far less than its increase in production, possibly signaling domestic crude use has soared with summer temperatures.

The four nations boosted crude and condensate shipments last month by 758,000 barrels a day, or 6%, to a combined 13.68 million barrels a day, tanker-tracking data compiled by Bloomberg show. The increase reversed the previous month’s drop, as the region’s producers restored more than 1 million barrels a day of production that they removed from the market in June.

Flows from the four producers — which account for about 72% of production among members of the Organization of Petroleum Exporting Countries — rose to India and China. Shipments to South Korea slumped, possibly due to refiners opting for supply from the U.S. Gulf Coast.

Flows edge higher as countries reverse voluntary output cuts

Exports from Kuwait jumped in July, rising by 294,000 barrels a day, or 18%. Last month’s flows included a first shipment of crude from the Mina Saud terminal since the restart of the Wafra field in the Neutral Zone shared with Saudi Arabia. Production from the field halted in 2015 due to a dispute between the two countries.

Shipments from the U.A.E., which include condensates that are outside the scope of the OPEC+ deal, rose by 263,000 barrels a day, or 10%, in July. Shipments from Iraq, which has come under pressure from Saudi Arabia after failing to meet its target in May and June, slid by just 11,000 barrels a day.

Observed flows from Iran have been excluded, as tankers often disappear from tracking for weeks. In July, signals from eight tankers carrying an estimated 11 million barrels of Iranian crude or condensate appeared. The time and position at which the ships appeared suggest that two of them departed in June, with the other six leaving in July.

With nearly 16 million barrels of oil on ships from OPEC’s Middle East exporters yet to signal a final destination, estimates of flows to individual countries are subject to revision.

Flows to South Korea fell sharply in July, dropping by almost 550,000 barrels a day, or 27%, from the previous month. Shipments of Persian Gulf crude to South Korea had been remarkably resilient, even increasing in the depth of the Asian Covid-19 outbreak between March and May.

The slump in July loadings bound for to South Korea could be linked to an earlier surge in purchases of of U.S. crude for August arrival. According to tanker-tracking data monitored by Bloomberg, 7.8 million barrels of crude from the U.S. Gulf coast are due to arrive at South Korean ports in August, up from 4.6 million barrels in June and none in July.

Flows slump to lowest on record

Aggregate Persian Gulf crude flows to India, the closest major market, continued to recover in July, although they remained almost 480,000 barrels a day, or more than 18%, below their average level in the twelve months to April 2020. Shipments increased month-on-month by 139,000 barrels a day, or 7%. The biggest increases in shipments, in both volume and percentage terms, came from Kuwait, up by 91,000 barrels a day, or 59%, and the UAE, whose shipments to India rose by 86,000 barrels a day, or 30%.

Kuwait, U.A.E. boost crude flows to India

Flows to the U.S. continued to fall, with shipments from Saudi Arabia dropping to 226,000 barrels a day in July, their lowest on record, from a revised 350,000 barrels a day in June. The volume of crude leaving OPEC’s biggest exporter for American ports was less than a fifth of the amount shipped in April, when the kingdom embarked on its short-lived production surge. Those April-loading cargoes have now been offloaded at terminals on the Gulf and West Coasts of the U.S. and imports of Saudi crude have slumped as a result.

Shipments tumble to the lowest on record

Observed shipments from Persian Gulf OPEC countries, excluding Iran, to China edged higher in July and remain in line with levels seen between September and February. Much of the surge in exports to China during April and May, which averaged 5 million barrels a day, appears to have ended up in storage tanks and ships idling off Chinese ports. Tankers full of Kurdish crude from northern Iraq that were still anchored off Chinese ports at the end of July are beginning to discharge their cargoes after being at anchor for between 42 and 60 days.

Shipments edge up on higher Saudi exports

Crude and condensate flows to Japan rebounded by 20% in July from the prior month, with Iraq making its first shipment to the Asian nation since March. Still, flows were almost 720,000 barrels a day, or 32%, below pre-virus levels. The nation’s refinery runs in the third quarter will probably remain unchanged from the previous three-month period, according to the head of the Petroleum Association of Japan.

Shipments rebound after June dip

Note: The figures above include exports from northern Iraq via Ceyhan in Turkey and outflows from the U.A.E.’s Indian Ocean coast and from Saudi Arabian Red Sea ports. They include crude and condensates, a light form of oil extracted from gas fields. Figures for flows to individual destinations are subject to change, especially when ships pass transit points like Singapore and the Suez Canal.

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