Kpler Crude Oil Research

May 06 2021

OPEC+ seaborne exports up 690 kbd in April as the organization starts to gradually increase output.

The volumes below reflect Kpler expectations of OPEC+ market supply reductions. They account for variation in exports and in onshore inventories. These totals are not a proxy for production.


Kpler data shows OPEC+ seaborne oil exports increased by 690 kbd to 26.8 mbd in April. This increase comes after a 580 kbd fall m/m in March and as oil supply was expected to rise following OPEC’s+ decision to ease very gradually the cuts for the next 3 months.


Last week’s JMMC meeting saw OPEC+ stick to its policy of gradually reviving oil production, despite worries over India’s oil demand. As per the decision, overall OPEC+ production should increase by 350 kbd in May, 350 kbd in June and 450 kbd in July. On top of this, Saudi Arabia will also gradually unwind its voluntary cuts by 250 kbd in May, 350 kbd in June and 400 kbd in July.


This decision has been taken in the aim of stabilizing prices in anticipation of a strong recovery in global demand. With the vaccine rollout proving a success in the US and Europe’s situation improving, global oil demand has started to pick. On the bad news front, India, which is the second largest seaborne oil importer, is experiencing the most difficult situation. The worsening of the pandemic there could affect the global demand recovery. 


Most OPEC+ members - including leaders - start boosting exports in April

In April, only Russia (+130 kbd) and Kazakhstan (+20 kbd) were technically allowed to ease cuts. Apart from these, OPEC+ production was only expected to rise from May onwards, but our data shows that most members already boosted exports in April. Leaders Russia and Saudi Arabia increased their m/m exports by 9.5% and 2.7%, up by 270 kbd and 154 kbd respectively. Algeria registered the most significant increase in its exports, which rose 37.5% from 354 kbd to 487 kbd while the UAE and Iraq have exported 230 kbd and 100 kbd more m/m.


Russian producers seem to be eager to bank on the upcoming economic reopenings in Europe as exports to European countries jumped 142 kbd, while shipments to China fell by 116 kbd. This is piped ESPO exports to Daqing have remained stable at just around 600 kbd over the past months. 


The UAE also posted a strong jump. Indeed, their exports increased by 230 kbd (or 11%) to 2.3 mbd. This increase comes a month after ADNOC started a new pricing strategy with the launch of a new Murban futures contract. This decision is expected to boost all UAE grades exports (Murban, Upper Zakum, Das, Umm Lulu) by limiting the destination restrictions for all these grades and by removing the risk involved with benchmarking against Dubai. Exports of the Murban grade jumped 150 kbd. However, the increase in ADNOC's exports is probably linked to storage draws: onshore inventories fell by 7.58 mb on the month, slightly more than the exports increase on a daily average basis.


Indian oil imports fall 190 kbd m/m, could fall by another 800 kbd in the coming weeks

Although India’s economic growth factors remains relatively strong, the worsening of the Covid pandemic could affect the global demand recovery. Indian oil imports fell 190 kbd in April and such a trend could continue as low storage capacity gives limited room to manage oil price volatility. Onshore inventories currently hold around 106 mb, against an all-time high of 116 mb, and a nominal capacity of 143 mb. Floating storage in India is currently quite low, at 1.9 mb, but hit a high of 17.8 mb in April last year due to covid-19.


Despite the tough situation, Saudi Arabia's shipments to the country jumped by 223 kbd to 786 kbd, a six-month high. This comes after a feud between both countries' energy ministers led to a decline in oil trade in February and March.


A US-Iran negotiations breakthrough is near, with up to 1.7 mbd of additional volumes hitting the market by end-2021

Furthermore, the impact on supply of the Iran-US nuclear talks must be considered. Indeed, Iran has already boosted its exports since Biden’s election, averaging 670 kbd since his arrival at the White House – and our estimates are likely to be revised upwards as we receive more information – against 340 kbd in the six months prior to the US elections.


Although arrivals of Iranian oil to China have fallen 150 kbd to 464 kbd in April, we expect a lot more arrivals to take place in May and June, potentially averaging close to 1 mbd over the two months. More Iranian exports are a possibility as negotiations are moving forward. NIOC has the ability to produce 4.5 mbd of crude and condensate and a potential to export around 2.5 mbd at capacity (we saw a maximum of 2.8 mbd shipped in May 2018 just before the US exited the JCPOA). This is an upside of about 1.7-1.9 mbd to the current situation. We believe production ramp-up, which has already started - could take up to six months after sanctions on oil exports are lifted. 



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