Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Mar. 30 -- Seaborne oil exports from the Organization of Petroleum Exporting Countries, except Angola and Ecuador, will decline by 770,000 b/d in the 4 weeks to Apr. 11, according to shipping analyst Oil Movements (OM).
Exports will average 22.23 million b/d, down from 23.00 million b/d in the 4 weeks to Mar. 14, OM said in an estimate that is lower than last week's, which itself represented a 5 1/2-year low of 22.41 million b/d.
"Demand for long haul (mainly OPEC) crude will continue to head south running into the next quarter," OM said, adding: "OPEC sailings are set to fall sharply in the 4 weeks to Apr. 11."
It said the "contest in the first quarter between declining crude demand and OPEC supply restrictions may be about to end in a tie. Crude futures have climbed back above $50/bbl since OPEC decided to hold to current quotas, a qualified signal of approval from the market."
But OM said the first quarter will likely close out with a sizeable crude stock overhang still in place in Atlantic basin markets, if not globally.
"Product demand will sink to an annual low in the next quarter, and with high inventories, refinery runs are unlikely to go up by enough to make a significant difference —at least not until the latter half of the period," it said.
Weak refiner demand will help OPEC's progress towards compliance with December targets, at least in the near term. Latest estimates for sailings in April put the implied rate (for production) somewhere in the 75-80% region.
"At the current rate of progress—with ongoing help from refiner demand—the target could be reached in late April-early May," OM said. "After that point long-haul crude demand should start to move up again seasonally as the summer season comes into view."
The sharp decline in long haul sailings coming up is targeted entirely at Atlantic Basin destinations, the analyst said.
Westbound sailings from the Middle East are in a phase of sharp decline, accounting for all of the cuts in regional sailings recorded over the last 12 months.
At the same time, eastbound shipments from the Atlantic Basin (West Africa and North Sea, but excluding movements eastbound from North Africa and the Black Sea) are climbing seasonally, taking net inflows into the Atlantic Basin down to record lows.
Middle East westbound oil in transit was once a major force driving the tanker market. Changes in long haul westbound flows—and stocks—set the tone for Middle East spot freight rates.
Eastbound freight rates currently are the market marker; but westbound oil in transit is still a player.
Spot rates have sunk below Wind Scale (WS) 30 for some recent eastbound cargoes, while most of the movement in transit volume is being generated by resumed decline in westbound oil. Eastbound oil is rising slightly.
OM's forecasts of OPEC exports are based on spot and term chartering of crude from OPEC member countries, except Angola and Ecuador.
Contact Eric Watkins at [email protected].
