IRAQI CRUDE IMPORTS HIGHEST IN THREE YEARS
OPEC Challenges Shale Afresh as Iraq Crude Floods U.S. Market
Naomi Christie .bloomberg.com
November 10, 2015 — 6:01 PM CST Updated on November 11, 2015 — 6:17 AM CST
- Sliding U.S. oil production reviving reliance on imports
- Tanker owners benefit as long-distance trade route boosted
Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures.
The cargoes show how competition for sales among members of the Organization of Petroleum Exporting Countries is spilling out into global markets, intensifying competition with U.S. producers whose own output has retreated since summer. For tanker owners, it means rates for their ships are headed for the best quarter in seven years, fueled partly by the surge in one of the industry’s longest trade routes.
“In the longer term, we expect the U.S. to have to increase imports next year by some 500,000 barrels to 800,000 barrels a day year on year,” Steve Sawyer, the head of refining at FGE, a consultant in London. “Given our projections for Iraqi output, it could well come from here.”Hunting for Buyers
Iraq, pumping the most since at least 1962 amid competition among OPEC nations to find buyers, is discounting prices to woo customers. The U.S. may increasingly become one of them after its own output dropped by as much as 500,000 barrels a day since June. An increase in trade between the two would boost tanker owners. Deliveries take at least 57 percent longer than for those to Asia, the most popular destination.
The tanker industry’s biggest ships earned an average of almost $76,500 a day so far in the fourth quarter, which would be the highest since mid-2008 if maintained through year-end, according to data from Clarkson Plc, the world’s biggest shipbroker.
Shipowners have already seen the benefit of higher rates thanks in part to the longer-distance cargoes. Shares of Oslo-listed Frontline Ltd., led by billionaire John Fredriksen, rose 61 percent to $28.60 from the 2015 low in August. Euronav NV is up 25 percent from the year’s low in February.
Gulf of Mexico
The ships bringing the 19 million barrels include vessels that left Iraq’s Basra Oil Terminal and are currently signaling U.S. ports as their destination. There is also one vessel that went through Egypt’s Suez Canal and identified by shipbrokers as going to the U.S. All except one are very large crude carriers, the industry’s biggest vessels, sailing to terminals in the Gulf of Mexico.
The U.S. is pumping 450,000 barrels a day less crude than during the peak in June. If all that oil were replaced by supplies from Iraq, it would require about seven supertankers each month.
Iraq is among the least expensive places in the world to extract crude. Capital costs are about seven times cheaper than for light, tight oil suppliers in the U.S. when measured by fields’ daily plateau capacity, according to the International Energy Agency in Paris.
West Texas Intermediate, the U.S. benchmark, fell 62 cents to $43.59 a barrel on the New York Mercantile Exchange at 12:08 p.m. London time. Brent, the global marker, lost 35 cents to $47.09.
The Middle East country sells its crude at premiums or discounts to global benchmarks, competing for buyers with suppliers such as Saudi Arabia, the world’s biggest exporter. Iraq sold its Heavy grade at a discount of $5.85 a barrel to the appropriate benchmark for November, the biggest discount since it split the grade from Iraqi Light in May. Saudi Arabia sold at $1.25 below benchmark for November, cutting by a further 20 cents in December.
“It’s being priced much more aggressively,” said Dominic Haywood, an oil analyst at Energy Aspects Ltd. in London. “It’s being discounted so U.S. Gulf Coast refiners are more incentivized to take it.”
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Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on
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Oil slides 3 percent; hits 2-1/2-mth low on U.S. stockpile, Iraqi supply
NEW YORK | By Barani Krishnan | Markets | Wed Nov 11, 2015 4:01pm EST | reuters.com
Oil prices fell about 3 percent on Wednesday, hitting August lows, on worries U.S. crude inventories were piling up and Iraq was bringing on more supply that would intensify OPEC's fight for market share.
U.S. crude stockpiles jumped 6.3 million barrels last week for a seventh week of builds, industry group American Petroleum Institute said on Tuesday, far surpassing the 1 million-barrels forecast by analysts in a Reuters poll. The U.S. Energy Information Administration (EIA) issues official inventory data on Thursday.
Separately, Reuters shipping data showed tankers with nearly 20 million barrels of Iraqi oil due to sail to the United States in November, almost 40 percent above the amount booked to arrive in October. That would be the largest U.S. monthly import of Iraqi oil since mid-2012.
Iraq is OPEC's No. 2 crude producer.
In another sign of oversupply, a traffic jam of about 40 oil tankers has emerged along the U.S. Texas coast.
"You can talk all you want about oil demand being better next year and beyond, but right now we have a heck of a glut on our hands that I think has to be priced in some more," said John Kilduff, partner at New York energy hedge fund Again Capital.
Brent crude LCOc1 settled down $1.63, or 3.4 percent, at $45.81 a barrel. Its session low of $45.62 was the lowest since Aug. 27.
U.S. crude's benchmark West Texas Intermediate (WTI) contract CLc1 settled down $1.28, or 3 percent, at $42.93.
WTI's fundamentals have been somewhat superior to Brent's in recent months due to easing U.S. shale oil output. But analysts said that advantage could fade as shale production shows new vigor.
"With U.S. commercial crude cover likely to see new 80-year highs by month’s end amidst some indications that the rate of production decline is slowing, our long held view that WTI will be re-visiting the late August lows of $37.75 has been reinforced," wrote Jim Ritterbusch of Chicago oil consultancy Ritterbusch & Associates.
Traders were also worried because the world's largest oil producers, Saudi Arabia and Russia, were still pumping around record levels to maintain market share.
OPEC member Ecuador said at an Arab-South American summit in Riyadh that the only way to balance the market was to cut production and it aimed to reach an agreement on that at the producer group's December meeting.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Oil Tanker Traffic Jam Off Texas Is Viewed as Sign of Oversupply
By THE ASSOCIATED PRESS NOV. 11, 2015
A traffic jam of oil tankers, with more than 20 million barrels of crude, has emerged along the Texas coast this month, a snarl that some traders see as the latest sign of an unyielding global supply glut. More than 50 commercial vessels were anchored outside ports in the Houston area at the end of last week, of which 41 were tankers, according to Houston Pilots, an organization that assists in navigation of larger vessels. Normally, there are 30 to 40 vessels, of which two-thirds are tankers, according to the group. Although the channel has been shut intermittently in recent weeks because of fog or flooding, oil traders pointed to everything from capacity constraints to a lack of buyers. “It appears that the glut of supply in the global market is only getting worse,” said Matt Smith, director of commodity research at ClipperData. Several traders said some ships might have arrived without a buyer, which can be hard to find as ample supply and end-of-year taxes push refiners to draw down inventories.
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Permalink Reply by Clyde T. Williams on
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Welcome to the international oil markets....10 years ago in KSA/UAE rumors were that bbl cost $12-14 loaded and ready to go...So KAS, KUW, UAE can deal with a $40...and only have 100% profit...so sad...yeah the biggest problem is income redistribution....Yeah KSA oil minister he did such a great job...by not doing anything he halved the price of oil.....Yes Iraqi are trying to sell oil into a down market....An issue may also be whether it is Iraqi oil at all...rather than Iranian, Kurdish, or ISIS'... but I was in MidEast tooooo longgg but now home in Calif. So the Saudi's hammered Nigeria/Venezula and other OPECs that were undercutting them...then the Russians-main target in Europe and China and maybe they thought, well as long as we are doing it...it will also have collateral damage on the 2015 drilling programs in Eagleford and Permian also...
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