Saudi Arabia almost cut off oil supplies to the US market


According to Bloomberg, Saudi Arabia has exported approximately 133,000 barrels per day in the United Stated in June, which is equivalent to one tenth of its 1.3 million bbl per day shipment in April.

If exports in the second half of June continue to be at the same low pace, imports of Saudi oil in the US may drop to the lowest level, which will help rebalance the US oil market.

"Saudi oil inflows will also decrease if domestic refineries increase production. However, at this stage, domestic production continues to decline," said Amrita Sen, chief oil analyst at Energy Aspects. "U.S. refineries will have no choice but to reduce inventory and import from outside," she added.

Of course, some Saudi shipments have no destination points yet, so the final count in the shipments to the US may probably not be accurate. However, the trend in June is unmistakable, as the flow of Saudi oil, which threatens to crush US refiners, is declining. The glut in April prompted US politicians to address this, and Senator Ted Cruz, a Republican from Texas, tweeted in April: "My message to the Saudis: TURN THE TANKERS THE HELL AROUND."

Thus, according to data from Saudi Arabia, from the second half of June, as well as in July, the country is not going to increase supplies to the US. In addition, it will help Saudi Arabia influence the world market more, since the data of US customs allow monitoring deliveries in almost real time. Less oil from Saudi Arabia is likely to reduce observed crude oil reserves in the United States, increasing its effect on price.

The recent flood of oil from Saudi Arabia into the US is largely a protracted effect of a price war. In 2019 and early 2020, Saudi Arabia supplied a relatively small amount of oil to the US, so the average supply volume was 475,000 barrels per day, according to the US government.

When the Saudi tankers unload their cargoes, US oil reserves rose to record highs, putting pressure on oil performance.

According to tanker tracking data, Riyadh reduced oil supplies in the US to 645,000 barrels per day in May, and this fall will become apparent in the second half of this month and early July, when ships arrive on the shores of the United States.

If the exports in the first half of this month drop further in figure, the supplies in the second half of next month may be affected as well. As of June 10, the US received approximately 10 million bbl Saudi oil per day, compared with the 16.9 million barrels for the whole of June last year, according to US customs data collected by Bloomberg and the Energy Information Administration.

Nevertheless, this downward trend will continue, so for loading in July, most US refineries have proposed a reduction in supplies, much more than their planned contract volumes. This is due to the fact that the latest official selling prices for Saudi oil are now at the highest level after the price war with Russia in March.

Saudi Arabia reduced supplies this month not only to the United States, but also to China (to 1.3 million barrels per day). Exports to Japan and India, however, were increased.

The material has been provided by InstaForex Company -