From Bloomberg
After flooding the U.S. market in recent months, Saudi Arabia plans to slash exports to the world’s largest oil market in the coming weeks, in an effort to dampen visible build-ups in crude inventories.
U.S. refineries given notice to expect lower shipments from Saudi in January; cut could test 30-year low
American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production, according to people briefed on the plans of state oil company Saudi Aramco.
Saudi crude shipments to the U.S. next month could even test the 30-year low set in late 2017 of 582,000 barrels a day, down about 40 percent from the most recent three-month average, the same people said, asking not to be named as the information isn’t public. The final figure could still change, they added.
By shifting the focus of Saudi export reductions toward the U.S., Riyadh hopes to show to the market it’s making good on its promise to cut supplies. Fluctuations in U.S. crude imports and stockpiles have an outsize impact on the market because data are available on a weekly basis. In other regions, oil traders only get official figures on a monthly basis, or not at all in the case of stockpiles in big consumers such as China and India.
The Saudi energy ministry didn’t reply to a request for comment.
While the plan to slash Saudi exports to America may ultimately convince a skeptical oil market about the kingdom’s resolution to bring supply and demand inline, it may anger President Trump, who has used social media to ask the Saudis and OPEC to keep the taps open.
Saudi total exports are set to drop to around 7 million barrels a day in January, down from about 8 million barrels a day in November-December, one of the people said. Khalid Al-Falih, the kingdom’s energy minister, told reporters last week that Saudi production will drop in January to 10.2 million barrels a day, down from 11.1 million barrels a day in November.
The oil market has so far largely ignored the production cuts that OPEC and its allies announced in early December, a larger-than-expected 1.2 million barrels a day — or just over 1 percent of global demand. Despite the OPEC+ curbs, benchmark Brent crude has fallen below $60 a barrel.
Could make the phone ring in Canada or Venezuela
The export curbs, if fully implemented, will affect big U.S. refiners such as Valero Energy Corp., Phillips 66, Chevron Corp., Exxon Mobil Corp. and Marathon Petroleum Corp., forcing them to buy similar crude elsewhere, such as Mexico, Canada or Venezuela. They could also hit Motiva Enterprises LLC, the Saudi-owned company that operates the largest refinery in the U.S.
Saudi Arabia has shipped 860,000 barrels a day of crude to the U.S. on average so far this year, according to Bloomberg calculations based on weekly customs data. Saudi exports into America had run even higher in the second half of the year, with July-to-December shipments rising to an average of 975,000 barrels a day, according to Bloomberg calculations.
