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Saudi Arabia seems to be determined to follow its plan to ramp
up oil exports in April, with the market already having observed a
first wave of crude oil towards Europe and the US in late March.
Several of the VLCCs fixed by the Kingdom in March have been
loaded, allowing the country to increase exports quickly. According
to IHS Markit Commodities at Sea,
weekly volumes in barrels per day have been following a stable
upward trend, since week 11 (starting 8th March).
Saudi Arabian crude oil liftings in barrels per
day
Moreover, Riyadh is understood to be increasing storage of crude
oil in Egypt during the last few weeks, primarily targeting the
European market. Production is expected to reach 12.3 million
barrels a day in April, from around 9.7 million in February.
Pressure by the US to end the price war doesn't seem to be having
an effect on Saudi Arabia's strategy so far.
The country has slashed its official selling prices, having
announced an impressive increase in its output, just after Russia
refused to join the OPEC+ alliance to cut output further.
Meanwhile, global oil demand is set to further collapse driven by
lockdowns across major oil consumers to prevent the spread of the
coronavirus.
With Riyadh now opening the valves, oil shipments have been
surging, with VLCC spot rates having surpassed USD 200,000 per day.
Saudi Arabia was exporting close to seven million barrels a day,
but current activity stands above nine million barrels a day.
Despite the increasing diplomatic pressure, Saudi Arabia plans
to export even more in the next few weeks. At least 18 ballast
VLCCs are currently positioned very close to Saudi Arabia's oil
terminals of Ras Tanura and Yanbu, which could load around 36
million barrels in total, according to IHS Markit Commodities at
Sea.
Number of ballast VLCCs close to Saudi Arabian terminals
of Ras Tanura and Yanbu
Saudi Arabia is not expected to change its policy any time soon,
as cargoes have been fixed for weeks ahead. There has also been an
interesting increase in shipments of cargoes heading to the USA.
The TD1 route, for crude oil carried on VLCCs from the Middle East
Gulf to the US, could experience a revival after experiencing a
sharp decline driven by the increase of US crude oil
production.
Route analysis of TD1: barrels of VLCC shipments from
Middle East Gulf to US PADD 3
Saudi Arabia is also trying to increase its market share in the
European market, recently exporting more to Egypt, with most of
this cargo to be re-exported into Europe. Egypt will start being
shown as one of the major destinations for Saudi Arabian exports
and could potentially surpass other traditionally major importers
of the country's barrels.
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Jan 27
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