U.S. refiners are receiving smaller shipments of oil from members of the Organization of Petroleum Exporting Countries (OPEC) due to the bloc’s production cut agreement, according to a new report by Bloomberg.
Weekly crude imports from seven bloc nations dropped by 14 percent last week, the Energy Information Administration said. The fall brings import levels down to the lowest since 2010, when the agency first started collecting weekly data.
Ecuador cut shipments to the United States by 86 percent and Kuwait cut exports by 58 percent, week-over-week.
Although oil prices have been improving through 2017 and into 2018, OPEC still has work to do to bring global oil inventories back to their five-year average—the metric that OPEC has vowed to achieve with the production cut deal, OPEC Secretary General Mohammad Barkindo said this week while on a visit to Azerbaijan.
“The worst is probably over for now. We are beginning to see light at the end of the tunnel but we still have some work to do because we still have inventories that are higher than the 5-year average,” Barkindo said at a press briefing in Azerbaijan’s capital of Baku, as carried by Reuters.
Last month, the Energy Minister of OPEC’s leading producer Saudi Arabia, Khalid al-Falih, said that “If we have to err on over-balancing the market a little bit, so be it.” Saudi Arabia is very particular about stabilizing oil above $60 or $70 a barrel in order to ensure the impending initial public offering of Saudi Aramco raises a good chunk of change.
“In the meantime, market re-balancing is clearly moving ahead with key indicators - supply and demand becoming more closely aligned, OECD stocks falling close to average levels, the forward price curve in backwardation at prices that increasingly appear to be sustainable - pointing in that direction,” the International Energy Agency recently said.
By Zainab Calcuttawala for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- North Sea Oil Has Escaped Its Death Spiral
- Scientists Are One Step Closer To Nuclear Fusion
- The World’s Largest Oil Traders Are Shifting Strategy
Moreover, the Saudis, the Iraqis and the Iranians are trying to secure a bigger share of the Chinese market. The rivalry is particularly stiff between Russia and Saudi Arabia where Russia has overtaken Saudi Arabia since 2016 to become the biggest crude oil supplier to China.
The United States still imports up to 8 mbd of crude oil from around the world despite their claims about significant rises in in US oil production. However, the importance of OPEC oil particularly from the Arab Gulf for the United States is declining. Moreover, by cutting its exports to the US market, OPEC could be in effect decelerating a build in US oil inventories thus supporting oil prices.
But there is more to OPEC’s new strategy. On the 26th of March this year, China, the world's largest oil importer, will launch a crude oil futures contract on the Shanghai Energy Exchange (INE) denominated in petro-yuan. OPEC oil exporters want to be part of this very significant development from the start.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Ammar Zaidan/ energy policy and science (Master) Ajou university/ Korea