OPEC’s Middle East Oil Flows Rise to 14-Month High Despite Virus

(Bloomberg) -- Crude supplies from OPEC's Middle East oil exporters, excluding Iran, swelled in February to the biggest since December 2018 despite deeper output cuts agreed for the first quarter of the year and the Covid-19 virus sapping demand.

Saudi Arabia, Iraq, Kuwait and the United Arab Emirates, which together account for about 70% of OPEC's entire production, shipped an average of 16.44 million barrels a day of crude and condensate last month, tanker-tracking data compiled by Bloomberg show. That was an increase of 600,000 barrels a day from revised January levels and comes as OPEC+ ministers gather in Vienna to discuss how to respond to the demand decline triggered by the coronavirus.

Saudi shipments in February slipped by 100,000 barrels a day from their January level, averaging 6.96 million. Exports from the country's Yanbu terminal on its Red Sea coast slipped by about 180,000 barrels a day to 690,000.

Iraq's exports rose month-on-month by 165,000 barrels a day to their highest level in three months. Shipments from its Basra oil terminal increased by 40,000 barrels a day to 3.4 million, while flows from the north of the country through the Ceyhan terminal on Turkey's Mediterranean coast rose by 120,000 barrels a day, or 30%.

Flows from Kuwait rose month-on-month in February as shipments to destinations including Japan and the Netherlands swelled, rising by 240,000 barrels a day, or 12%, to 2.3 million. The U.A.E. also shipped more crude and condensate last month, with exports rising by 300,000 barrels a day, or 10%, to their highest level since OPEC+ output cuts were introduced at the start of 2017.

Observed shipments from Iran have been excluded, as tankers leaving the country often only appear in tracking data several weeks later, once they have reached choke-points like the Strait of Malacca or the Suez Canal, making early assessments of flows from the country less reliable. Tracking signals from three tankers carrying an estimated 2.7 million barrels of Iranian crude or condensate appeared during in February in positions that the ships could only have reached if they had left the Persian Gulf the previous month, while a fourth vessel appeared in the Red Sea late in the month.

With more than 42 million barrels of oil on ships from OPEC's Middle East exporters yet to signal a final destination, estimates of flows to individual countries are subject to revision.

Persian Gulf crude flows to India, the closest major market, fell in February by almost 400,000 barrels a day, with all four countries monitored shipping less oil in February than during January. Shipments from Iraq were down by almost 170,000 barrels a day, while flows from Kuwait dropped by more than 100,000 barrels.

Flows to the U.S. slumped in February, falling to 308,000 barrels a day. Iraq and Saudi Arabia are the only two Persian Gulf countries sending significant volumes to the U.S. -- Kuwait hasn't shipped any barrels there in the first two months of this year -- and flows from both those countries were down in February. Saudi shipments were just 100,000 barrels a day, although that figure could rise, as 15 million barrels of Saudi crude is on ships that have yet to signal a final destination. A voyage time of about six weeks to both the East and West Coasts of the U.S. means that actual flows often don't become apparent for several weeks after loading.

Observed shipments from Persian Gulf OPEC countries, excluding Iran, to China were boosted by a surge in flows from Iraq in February, even as the spread of coronavirus erodes demand. China is emerging as the largest buyer of Kurdish crude this year after its purchases from the region nearly doubled last month.

Shipments from the region to Japan rebounded in February, after dropping in January to their lowest level since September. Shipments to Japan from Kuwait and the U.A.E. both rose, with a dip in flows from Saudi Arabia offsetting some of that increase. Iraq shipped no crude at all to Japan in February for the second straight month.

Flows to South Korea, the other big Asian buyer of Persian Gulf crude, fell by more than 80,000 barrels a day, or 5%, in February. The biggest drop in volume terms came from the U.A.E., where shipments were down by 85,000 barrels a day, or 32%. SK Innovation, South Korea's biggest refiner, plans to reduce CDU operating rates at its Ulsan complex by 5%-10% in March and April as the coronavirus crimps demand.

Note: The figures above exclude exports from northern Iraq via Ceyhan in Turkey but include outflows from the U.A.E.'s Indian Ocean coast and from Saudi Arabian Red Sea ports. They include crude and condensates, a light form of oil extracted from gas fields. Figures for flows to individual destinations are subject to change, especially when ships pass transit points like Singapore and the Suez Canal.

• Bloomberg Terminal users can click on NI TANTRA for all tanker tracking stories, ALLX CUAG for tickerized data for Persian Gulf OPEC flows, and LINE GBLCRUDE for an overview of Bloomberg tanker tracking.

To contact the reporter on this story: Julian Lee in London at jlee1627@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net, John Deane, Brian Wingfield

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