• 4 minutes Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 8 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 11 minutes Why Trump Is Right to Re-Open the Economy
  • 13 minutes Its going to be an oil bloodbath
  • 2 mins Ten days ago Trump sent New York Hydroxychloroquine. Being administered to infected. Covid deaths dropped last few days. Fewer on ventilators. Hydroxychloroquine "Cause and Effect" ?
  • 2 hours US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 7 hours Mr
  • 16 hours While China was covering up Covid-19 it went on an international buying spree for ventilators and masks. From Jan 7th until the end of February China bought 2.2 Billion masks !
  • 4 hours Free market or Freeloading off the work of others?
  • 4 hours China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 5 hours Marine based energy generation
  • 17 hours What If ‘We’d Adopted A More Conventional Response To This Epidemic?’
  • 18 hours How to Create a Pandemic
  • 19 hours Apple to Bypass Internet and Beam Directly to Phones
  • 11 hours Which producers will shut in first?
  • 18 hours Real Death Toll In CCP Virus May Be 12X Official Toll
Alt Text

U.S. Rig Count Could Collapse By 65%

The American oil and gas…

Alt Text

Demand Destruction Will Decimate Oil Prices

The long-term ramifications of the…

Alt Text

The Largest Oil Market Intervention In History?

While the figures quoted in…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Premium Content

Expect Much Tighter Oil Markets

As oil prices hover close to multi-year highs, Saudi's Oil Minister has hit the wires saying that OPEC 'shouldn't be complacent and listen to some of the noise such as mission accomplished' . Just as we learned earlier in this economic cycle via 'don't fight the Fed', we too should take heed: 'Don't fight the Falih'.

Year-to-date, U.S. crude inventories have risen by 3 million barrels, compared to 53 million barrels for the same period last year. Our seasonal Q1 build has been distinctly errant.

While a number of factors can be assigned for such a lack of upward trajectory (higher exports, stronger refinery runs, lower waterborne imports), the slashing of crude flows to the U.S. from Saudi Arabia has also played a part. Saudi crude deliveries were down over 50 million barrels year-on-year in Q1, a third consecutive quarter of considerably lower year-on-year imports.

The aforementioned combo of higher exports, stronger refinery runs and lower waterborne imports have colluded to leave Q1 U.S. crude inventories 110 million barrels lower than end-March last year. (Granted, this is from a high-water mark indeed - the absolute record of U.S. crude inventories at 535.54 million barrels, but hey).

(Click to enlarge)

In 2017, Saudi crude deliveries to the U.S. dropped by 160,000 bpd versus the prior year. Meanwhile, total OPEC deliveries to U.S. shores in both 2016 and 2017 averaged ~3.2 million barrels per day, with imports last year really strong in the first half of the year, before taking a dive in the second half (hark, below).

In Q1 of this year, OPEC deliveries averaged close to 2.7 million bpd, down nearly 20 percent on year-ago levels and the lowest quarter since Q3 2015. This is both a combination of OPEC reining in supplies, and a lesser need from U.S. refiners for OPEC barrels, as they lean as heavy as they can on soaking up rising domestic production. Related: Can Japan Dodge Trump’s Trade War?

(Click to enlarge)

The strength in OPEC flows into the U.S. early last year is indicative of the broader strength in total OPEC exports. Through the first seven months of 2017, OPEC on the aggregate had only taken ~60 million barrels off the market versus the October 2016 reference level. Related: Oil Prices Dip On Crude, Gasoline Build

In Q3 and Q4, however, they knuckled down, closing out the year having removed the best part of 200 million barrels off the market. This was not only driven by lower Saudi exports, but also by compliance from the likes of Kuwait, and amid production struggles of Venezuela, Angola and Iran.

The trend has continued with gusto through the first quarter of 2018, closing in on 250 million barrels - helping to illustrate why OPEC's goal of lowering inventories to the five-year average is now within its grasp.

Given ongoing rhetoric from Khalid al-Falih about 'not becoming complacent', we should expect the market to continue to tighten, with Saudi maintaining its grip.

(Click to enlarge)

By Matt Smith

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage






Leave a comment
  • Mamdouh G Salameh on April 25 2018 said:
    OPEC members should heed the advice of Saudi oil minister Khalid al-Falih. Mr al-Falih pointedly rebutted the claim “mission accomplished” which was first used by the International Energy Agency’s (IEA) to indicate that the global oil market is now re-balanced. He knew that the IEA’s objective was to seduce the OPEC members into believing that this is the case but the Saudi oil minister has seen through that ploy. He previously rebuked the IEA publicly during the Economic Forum in Davos, Switzerland for its continuous hyping about US shale oil.

    There is some correlation between the decline in Saudi and OPEC crude oil exports to the United States and the almost equivalent decline in US oil inventories since last year.
    This might go a long way towards explaining how the US was using a build in US crude oil inventories to manipulate oil prices.

    Yet, President Trump did not hesitate to accuse OPEC of manipulating oil prices when it was, in fact, exercising its right to defend the interests of its members.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News