Saudi crude exports surge to four-month high in September

Saudi Arabia’s crude exports jumped by half-a-million barrels a day in September, as increased buying by India and South Korea helped to offset a dip in Chinese demand.

Observed shipments from the kingdom rose to about 6.2 million barrels daily, the highest since May, according to tanker-tracking data compiled by Bloomberg. It compares with 5.7 million barrels a day in August.

The Organization of Petroleum Exporting Countries and its allies relaxed their supply cuts starting in August, though production targets are set to remain steady through the end of the year. Saudi Arabia, OPEC’s largest producer, has consistently held to its pledged output quota while pressing other members of the OPEC+ alliance to do the same.

For September, Saudi Arabia cut the price of its flagship oil grade to Asia for the first time in four months, creating an incentive for refiners in the region to boost their purchases of Saudi crude. In China, stockpiles have risen after the country binged on oil when crude was cheap in April and May, as the pandemic battered the oil market. Independent refiners have also used up many of their import allocations.

Saudi shipments to China, sill the largest buyer of the kingdom’s oil, dropped to 1.3 million barrels a day, the lowest since June. Flows to India rose to 733,000 barrels a day, the highest since April. Cargoes to South Korea and Egypt, a storage hub and transit point to Europe via the Suez Canal, both jumped to the highest in three months.

Cooler Weather

The weather may be another factor behind the higher Saudi shipments last month. Cooler temperatures mean the kingdom needs to burn less of its crude for domestic use in power generation for air conditioning, potentially freeing up oil for export.

The average decline in Saudi crude burn between August and September from 2014-19 was 73,000 barrels a day, according to Bloomberg calculations based on data from the Joint Organisations Data Initiative. Last month, Riyadh was a little less hot than in August, AccuWeather data show.

Vessel-tracking compiled by Bloomberg includes supertankers and Suezmax vessels, the largest ships that can haul crude. Aframax shipments to Pakistan from the Saudi port of Ras Tanura aren’t part of September’s figures because their cargo hasn’t been determined.

Vessels hauling about 12.5 million barrels of oil haven’t yet indicated their final destinations, and some figures will be revised higher as that information becomes clear.

Shipments to the U.S. dropped to 183,000 barrels a day in September, which would be the lowest since Bloomberg began tracking the cargoes at the beginning of 2017. However, it takes almost six weeks for a tanker to sail from Saudi Arabia to the U.S., and some ships that are en route may eventually signal an American port.

In recent months, Saudi flows to the U.S. have dropped significantly. In early September, U.S. imports of the kingdom’s crude fell to the lowest since at least 2010, weekly data from the Energy Information Administration showed.