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Saudi Arabia and allies can replace lost Iranian oil

The US said on Monday that it won’t extend the sanctions waivers for eight countries importing crude oil from Iran. The move could remove around 1.1 million bpd from the market.

Although Rystad Energy anticipated a further tightening of sanctions, the details in the announcement have led us to revise our forecast downward for Iranian crude production.

Rystad Energy forecasts that production will drop to 2.27 million bpd for the second half of 2019, reaching this level by July 2019, which equates to a drop of 0.43 million bpd from current March 2019 levels.

The net effect for the oil market is bullish, as the market will lose more supply from Iran, mostly of medium-sour and heavy-sour quality.

“However, Saudi Arabia and several of its allies have more replacement barrels than what would be lost from Iranian exports in a worst case scenario. This should limit the positive impact on crude prices,” says Rystad Energy Head of Oil Market Research, Bjørnar Tonhaugen.

“Since October 2018, Saudi Arabia, Russia, the UAE, and Iraq have cut 1.3 million bpd, which is more than enough to compensate for the additional loss. However, realistic spare capacity will be cut significantly, reducing room for error in Libya, Nigeria, and Venezuela,” Tonhaugen added.

Rystad Energy, the independent energy research and consultancy in Norway with offices across the globe, says that Iranian crude exports have dropped from around 2.5 million bpd in April 2018 to around 1.1 million bpd currently.

“In our new base case, we no longer expect India to buy Iranian oil after May 2019, and now only expect China and Turkey to continue purchasing Iranian cargoes. We lower our Iranian crude exports estimate from 900 000 bpd to 600 000 bpd from May 2019 onwards, allocating around 500 000 bpd of exports to China and the remainder to Turkey,” Tonhaugen remarked.

The density and sulfur content of the main crude grades exported by the “four cutters” – Saudi Arabia, UAE, Iraq and Russia – are of similar quality to Iran’s main export grades, Iranian Heavy and Iranian Light.

“Saudi Arabia, Russia, the UAE, and Iraq will have no problem replacing Iran’s crude grades, such as Iranian Heavy, Iranian Light, and West Kharoon,” Tonhaugen said. “We believe that Saudi Arabia has ample capacity of Arab Light especially, which is a grade of similar quality to Iranian crudes, due to the current production cuts. Russian Urals and Iraq’s Basra Light is also comparable to Iranian crude quality, while UAE’s main export grades are somewhat lighter and sweeter than Iran’s.”

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Pray, why would SA, Russia even want to replace boycotted Iranian / Venezuelan crude?

I suppose they would be happy with $80-90 / bbl. and so would I. Don't drive much but am heavily invested in RDS.

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6 minutes ago, RuudinFrance said:

Pray, why would SA, Russia even want to replace boycotted Iranian / Venezuelan crude?

I suppose they would be happy with $80-90 / bbl. and so would I. Don't drive much but am heavily invested in RDS.

Simple enough, to gain and capture market share and increase their revenues without killing demand of oil by having oil prices sky rocket !!

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Saudi Aramco Said to Give Extra Oil to Crude-Hungry Asian Buyers

Saudi Arabia is set to supply more crude to oil-starved Asian refiners, and extract a heavy price for it.

State-run producer Saudi Aramco will sell additional cargoes to customers in the world’s biggest oil-consuming region for June loading, according to people with knowledge of the matter. The shipments will be on top of those scheduled under long-term crude contracts, they said, asking not to be identified because the information is confidential.

While the extra supplies will alleviate a squeeze driven by U.S. sanctions on Iran and Venezuela as well as unexpected disruptions from Russia to Nigeria, the refiners face a costly bill. Aramco raised its official selling price for June cargoes of its flagship Arab Light crude to the biggest premium versus Middle East benchmark prices in 11 months. The cost of the Arab Medium variety was set at the highest since December 2013, while Arab Heavy was increased to the most in over six years.


The higher costs aren’t expected to deter Asian buyers, who had earlier this month asked OPEC’s biggest producer for additional supplies even before the kingdom set its pricing for June cargoes. The scramble for shipments follows the May 2 expiry of U.S. sanctions waivers for buyers of Iranian oil, which the White House decided not to renew as part of its campaign to squeeze Tehran’s finances.

Global benchmark Brent crude rose 0.5 percent to $70.26 a barrel on the London-based ICE Futures Europe exchange at 9:46 a.m. in Singapore on Wednesday, after closing 1.9 percent lower in the previous session. Prices slipped 1.8 percent last week, snapping a five-week rally.

Supply Uncertainty

Refiners in India, where oil demand is growing at the fastest pace in the world, are set to receive as much as 200,000 barrels a day of incremental supplies, the people said. Some refiners in China, the top crude importer, and Japan will also receive additional shipments, they said.

Aramco was willing to supply more volumes to meet the requests of a major Chinese refiner, said a person familiar with the company’s procurement, although details on the type and quality of oil on offer remained unclear. That’s before the official announcement of the kingdom’s monthly allocations for June, which is due later this week.

The press office for Aramco, known officially as Saudi Arabian Oil Co., couldn’t immediately comment.

Prices had seesawed previously on uncertainty over how Saudi Arabia would respond to the tighter U.S. sanctions, as well as other unexpected supply disruptions across the globe. Energy Minister Khalid Al-Falih has said the kingdom will keep the market balanced, but also signaled that the Organization of Petroleum Exporting Countries and its allies including Russia could extend output curbs until the end of this year.
Source: Bloomberg

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OPEC pumps 30.26 mil b/d in April, as sanctions-hit Iran’s output falls: Platts survey

After four months of decline, tightening the oil market considerably, OPEC’s collective crude oil production in April held relatively steady from March, rising just 30,000 b/d to 30.26 million b/d, according to an S&P Global Platts survey.

However, individual output levels among the 14 OPEC members varied month-on-month, with Iran’s sanctions-induced slump and Angola’s drop offset by significant rises in Nigeria and Iraq and recoveries in crisis-torn Libya and Venezuela, the survey found.

Saudi Arabia, the organization’s largest producer by far, held its April output at 9.82 million b/d, the lowest in over four years and well below its quota under an OPEC/non-OPEC accord, according to the survey, as it continues to demonstrate considerable restraint in hopes of bolstering oil prices.

But with the US this month tightening its sanctions on crude exports from Iran by allowing waivers to eight countries to expire, all eyes will be on Saudi Arabia and how it manages its production going forward.

The kingdom, which says it has a total production capacity of 12.5 million b/d, faces immense pressure from the US to keep the oil market well-supplied in the event of a squeeze due to sanctions, but must weigh its own internal budgetary aims, as well as OPEC unity.

Geopolitical rival Iran, whose production has now fallen to below where it was when US sanctions were last enforced between January 2012 and January 2016, has denounced in advance any moves by other members to claim its market share.

Iran pumped 2.57 million b/d in April, a 120,000 b/d drop from March and the lowest since December 1988, the Platts survey found, as many buyers began to shy away in anticipation of the US decision on the sanctions waivers. Many analysts expect an even heftier fall in Iranian crude production going forward as the US cracks down on sanctions enforcement.

Saudi Arabia is set to host a meeting of the nine-country OPEC/non-OPEC market monitoring committee that it co-chairs with Russia on May 19 in Jeddah, where comments from oil ministers are sure to be monitored closely.

The next full OPEC meeting is June 25 in Vienna, with Russia and nine non-OPEC allies joining talks the following day, as the coalition needs to decide on the future of its 1.2 million b/d production cut agreement that expires June 30.


Among the 11 OPEC members with output quotas, compliance in April was 116%, according to Platts calculations, largely due to Saudi discipline, giving the coalition some cushion to increase production and still remain within the parameters of the deal.

But some members are already producing well in excess of their quotas.

Nigeria boosted its April production to a 14-month high of 1.95 million b/d despite delays to loadings of key export grade Qua Iboe according to traders and disruptions to a major Bonny Light pipeline, the survey found.

Nigeria’s quota under the deal is 1.69 million b/d, though it disputes the inclusions by Platts and other market watchers of some grades that it considers to be condensate.

Iraq, likewise, raised its output in April, pumping 4.67 million b/d, the survey found, as it did not experience any weather-related shut-ins as it did in March. Its quota is 4.51 million b/d.

Libya, which does not have a quota, produced 1.10 million b/d in April, the highest since June 2013, as it benefited from the ramp-up of its Sharara field, which is prone to securioty according to the survey. Meanwhile, Venezuela, which is also exempt from the deal, saw some recovery from power outages that had crippled the country in March to pump 780,000 b/d, though many oil facilities are still impaired and production remains well below its peak.

In Angola, declines at mature fields brought production down to 1.41 million b/d in April — the lowest level since it joined OPEC in 2007 — even with the new Kaombo field coming online.

The Platts OPEC figures were compiled by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data.


Algeria 1.02 0.00 1.02
Angola 1.41 -0.05 1.46
Congo-Brazzaville 0.34 -0.01 0.35
Ecuador 0.53 0.00 0.53
Equatorial Guinea 0.13 0.00 0.13
Gabon 0.20 -0.02 0.22
Iran 2.57 -0.12 2.69
Iraq 4.67 0.10 4.57
Kuwait 2.69 -0.01 2.70
Libya 1.10 0.04 1.06
Nigeria 1.95 0.11 1.84
Saudi Arabia 9.82 -0.05 9.87
UAE 3.05 0.00 3.05
Venezuela 0.78 0.04 0.74
Total 30.26 0.03 30.23


Algeria 1.02 1.025 0.00
Angola 1.41 1.481 -0.07
Congo-Brazzaville 0.34 0.315 0.03
Ecuador 0.53 0.508 0.02
Equatorial Guinea 0.13 0.123 0.01
Gabon 0.20 0.181 0.02
Iran 2.57 EXEMPT N/A
Iraq 4.67 4.512 0.16
Kuwait 2.69 2.724 -0.03
Libya 1.10 EXEMPT N/A
Nigeria 1.95 1.685 0.27
Saudi Arabia 9.82 10.311 -0.49
UAE 3.05 3.072 -0.02
Venezuela 0.78 EXEMPT N/A
Total 25.81 25.94 -0.13

Notes: Qatar left OPEC, effective January 1

In December, OPEC and 10 non-OPEC partners agreed on a new supply accord, which runs from January-June and exempts Iran, Libya and Venezuela.

The next OPEC meeting will be on June 25, with the OPEC/non-OPEC meeting due the next day.

The S&P Global Platts OPEC survey, which has been published since 1988, measures well-head crude oil production in each member country.

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