Saudi crude exports down by a third in May

Crude exports loaded in May from Saudi terminals fell by a third from the previous month to hit their lowest level in Argus records, as the latest Opec+ production deal capped Saudi Arabia's output close to 8.49mn b/d last month.

Saudi crude terminals shipped out a combined 6.28mn b/d in May, down by 32pc on the month and the lowest level in Argus records, which started in August 2017, and a sharp plunge from the 9.22mn b/d in April, when Saudi Arabia flooded the market with record output after Opec+ talks collapsed in March. The group struck its new agreement in mid-April.

The May export figure does not include crude shipped from the recently restarted Neutral Zone output that Saudi Arabia shares with neighbouring Kuwait. Neutral Zone exports from the Khafji field increased by 12pc to 127,000 b/d in May, probably also including crude produced in previous months.

State-owned Kuwait Gulf Oil (KGOC) said that Khafji output will be temporarily shut in throughout June, as Kuwait and Saudi Arabia aim to honour their pledges to deepen this month's cuts beyond their deal-brokered obligations, to respective output targets of 2.09mn b/d and 7.49mn b/d. These stricter reductions will not be observed beyond June, Saudi oil minister Abdulaziz bin Salman said on 8 June.

The June production goalpost could prompt Saudi Arabia to further reduce exports this month and in early July, or resort to stored volumes. The country usually also has higher summer crude consumption, although it has made progress in efforts to use more gas for that purpose.

Pre-empting tighter sour supplies, Saudi state-controlled Aramco has increased all but one of its June prices for crude sold to all destinations this month, applying the sharpest $5.80-7.50/bl month on month increases for northwest European and Mediterranean buyers.

Around 56,000 b/d of May-loaded Saudi crude is aboard vessels that have yet to declare final destinations. So far, Argus tracking data shows that shipments to Aramco's main Asian market fell by just 21pc to a six-month low of 4.84mn b/d. Shipments to China fell by 13pc to 1.97mn b/d, but stayed above the 1.51mn b/d average of the first quarter — when China's Covid-19 outbreak was at its peak — and the 1.52mn b/d of full-year 2019. India halved purchases to 523,000 b/d in May, while deliveries to Japan were 13pc lower. South Korea's imports rose by 5pc to a five-month high of 882,000 b/d.

Saudi crude shipments west of Suez fell by 52pc from April's 2.8mn b/d, to just 1.34mn b/d — below the 1.63mn b/d of the first quarter, but in line with the 1.32mn b/d of full-year 2019. Direct shipments to the Americas fell by 42pc to 677,000 b/d, of which US-bound volumes dropped by 31pc to 645,000 b/d, well above the 379,000 b/d of the first quarter.

Direct deliveries to Europe comprised just one 400,000 bl cargo heading to Italy. Most European buyers and some US clients procure their Saudi allocations from Egyptian storage at Sidi Kerir, the Mediterranean-facing terminus point of the Sumed canal. Volumes reach Sidi Kerir after being dropped off at Ain Sukhna in the Red Sea, where discharges roughly halved on the month to 645,000 b/d in May.

European consumers are likely to continue favouring purchases from Sidi Kerir, as Aramco still only offers a freight subsidy limited to just 10pc of the outright cargo value — which many buyers find unattractive to stimulate requesting allocations loading from Mideast Gulf ports.

By Ruxandra Iordache