Updated: Dec 17, 2019
A confluence of factors drove seaborne OPEC oil exports to a multi-year low in September. Ongoing Venezuelan diluent sourcing issues, WAF export weakness and most importantly, Houthi attacks on key Saudi infrastructure all played a role. The United Arab Emirates was the only significant gainer on the month as the country prepares to launch a new Murban based pricing benchmark early next year. Total volumes departing member-states finished the month at just 21.77 mbpd, marking a decline of 1.2 mbpd m/m and 3.4 mbpd y/y. Indeed, departures held at more than two standard deviations below the 5-year average. The last time such a statistical anomaly characterized OPEC exports was in November 2014.
Venezuela led the decline with seaborne oil departures leaving the state managing just 392 kbpd in September, lower 416 kbpd m/m and 1.07 mbpd y/y. The weakness in departures pushed volumes out of the state to the lowest level in decades as Venezuela struggled to source diluent needed to evacuate and blend crude for sale and export. Domestic oil inventories finished at a 2019 high 39.4 mb increasing by some 2.8 mb over the course of the month. Much of this gain was driven by higher volumes at Jose (+3 mb), Venezuela’s largest port of departure and point of export for heavy-sour barrels produced in the prolific Orinoco Belt.
Much attention focused on Saudi Arabia in September following successful Houthi attacks on Abqaiq and Khurais. The assault sent shockwaves through oil markets after some 5.7 mbpd in total capacity was taken offline. Saudi seaborne exports finished September at just 6.36 mbpd, a decline of 409 kbpd m/m and 777 kbpd y/y. The export total was not only the lowest since May 2017 but held well under the 7 mbpd level benchmark that often serves as a barometer of KSA commitments to OPEC production cuts.
Given 50% of all Saudi barrels traditionally flow towards East-Asia, it would have been little surprise to find that KSA departures towards the region struggled in September. Nonetheless, such an outcome did not hold true given loadings steaming for East-Asia managed to finish down only slightly m/m to end at 3.51 mbpd. The Kingdom clearly held the view that barrels towards China remained a central goal given volumes headed for the state finished at 1.8 mbpd, falling just under the 1.93 mbpd record realized in July of this year. Exports towards the likes of Taiwan (-130 kbpd m/m) and Japan (-114 kbpd m/m) suffered as a result. It is likely that Saudi Arabia is working hard to fulfill Chinese demand in order to limit the East-Asian states desire to seek barrels from Iran, a trade flow that has recently declined to record low levels.
The UAE was the only OPEC member-state that boosted loadings by any sizeable margin. Barrels leaving the country finished September at 2.9 mbpd, higher 136 kbpd m/m. Such an increase was the largest since June of this year when the state increased exports by an impressive 617kbpd m/m.
Broadly lower OPEC flows through September heavily weighed on global onshore inventories, which finished down 85.8 mb on the month. Storage volumes in China led the way declining by some 39.69 mb. Inventories in Saudi Arabia (-20.8 mb), the United States (-9.9 mb), South Korea (-9.9 mb) and Japan (-6.5 mb) also led the way lower on the month.