One of the difficulties in constructing a narrative for the crude oil market and the output cuts promised by major exporters is what set of numbers to believe.
It’s possible to argue that Saudi Arabia, OPEC’s biggest exporter and the force behind the cuts, is either doing more than its share, or less, depending on the numbers used.
The export data published by the Joint Oil Data Initiative (JODI) on May 18 would support the view that the Saudis have more than met their commitment to the November deal between the Organization of the Petroleum Exporting Countries (OPEC) and allied producers to cut output by a combined 1.8 million barrels per day (bpd).
The JODI numbers show the Saudis exported 7.23 million bpd in March, slightly up from February’s 6.96 million bpd, and down from January’s 7.71 million bpd.
In the first quarter, JODI data puts Saudi exports at an average 7.3 million bpd, or 670,000 bpd down from the 7.97 million bpd reported for the last quarter of last year.
This would imply Saudi Arabia’s crude exports have fallen by quite a bit more than their commitment to cut 400,000 bpd from output under the Nov. 30 deal.
Vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts, however, tells a different story. This data shows Saudi exports of crude averaged 7.67 million bpd in the first quarter, down only 180,000 bpd from the 7.85 million bpd in the last quarter of 2016.
The above tracking and port figures were obtained by filtering the data to show vessels that have been discharged, are in the process of discharging, or are underway.
It’s interesting to note that the vessel-tracking data for the fourth quarter of 2016 shows Saudi exports actually lower than what the JODI numbers state, by some 120,000 bpd.
The shipping data, however, also shows exports in the first quarter of 2017 were 370,000 bpd higher than what JODI reports.
A small discrepancy could be ascribed to differences in assessing how much oil was aboard each vessel, but 370,000 bpd is a large gap, equivalent to about five very large crude carriers (VLCCs) a month.
The JODI data is based on self-reporting. The Saudis, along with the other countries that participate in the venture, provide the numbers themselves, and these are then collated and released monthly.
The tanker-tracking figures rely on International Maritime Organization (IMO) data provided by individual ships, as well as by collating port and other reports.
WHAT TO BELIEVE?
The discrepancy between the two data sets can colour one’s view of the state of the crude oil market.
If you believe the JODI numbers, a reasonable conclusion would be that the Saudis are contributing more than they said they would in November to tightening the global supply-demand balance for crude oil.
If you trust the vessel-tracking data more, your conclusion most likely would be that Saudi exports have been cut, but not by as much as the 400,000 bpd they promised to trim from output.
Another factor worth taking into account is the level of Saudi exports of refined products.
The JODI data shows refined product exports of 1.4 million bpd in March, down from February’s 1.52 million bpd, but up from January’s 1.15 million bpd.
For the first quarter the average product exports were 1.36 million bpd, up about 90,000 bpd on the 1.27 million bpd for the fourth quarter of 2016.
The market tends to ignore product exports, but does it really matter in what form Saudi oil reaches the market, crude or refined products?
This may well be an issue that determines margins for refiners, particularly in Asia, destination of about two-thirds of Saudi crude exports and much of its product shipments.
But if the Saudis are increasing product exports, which JODI data says they are, should this be taken into account when assessing their overall level of exports?
Ultimately, the best indicator of a tightening market is the level of global inventories of both crude and products, but once again data here is limited and incomplete.
While there is reliable data for industrialised nations – showing stocks haven’t drawn down in any meaningful way since the start of OPEC’s and its allies’ output cuts in January – there are at best only partial numbers for inventories in the developing world.
Overall, what the data does tell you is that it’s difficult to know exactly what is going on.
The only thing the JODI and vessel-tracking numbers do agree on is that Saudi crude exports were lower in the first quarter of this year than they were in the last three months of 2016.
What they disagree on is the extent of reduction, and that, unfortunately, is exactly what would help market participants judge just how quickly the crude oil market is re-balancing.
One thing is certain, the tanker data is far more timely than JODI figures.
It shows Saudi exports at 7.2 million bpd in April, and at 7.1 million for the first 21 days of May, although this figure may change by the end of the month.
The tanker data confirms a trend of lower Saudi exports, and suggests an acceleration in April and so far in May.
Source: Hellenicshippingnews.com
