Saudi crude arrives in USGC, could be held offshore

Market: Crude oil
15/05/20

Three of the five very large crude carriers (VLCCs) that have arrived in the US Gulf of Mexico carrying Saudi crude have yet to discharge, and shipbroker BRS said the arrival of others could add to the amount of crude in floating storage in the region.

The Maran Canopus arrived in the US Gulf on 5 May, according to oil analytics firm Vortexa. Tankers holding offshore for a week or more are typically considered to be floating storage. The Alsace and Sea Pearl have just arrived and are at anchor.

Two others — the Agios Fanourios and the Dalian — have offloaded via ship-to-ship transfer onto smaller Aframax tankers and that crude has reached ports in Louisiana and Texas.

The VLCCs are the first of many booked last month to take Saudi crude to the US Gulf, a result of Riyadh's decision to increase supply during April. Fourteen more VLCCs, carrying a combined 28mn bl of crude, will arrive between today and 30 June. The US imported just 6.7mn bl of Saudi crude each month for the past 12 months, Vortexa data show.

BRS said some of the crude that is imminent could end up being stored offshore, because although the 146mn bl of regional onshore available capacity could accommodate it all, such a large discharge could put pressure in the US oil supply chain.

Unloading all the Saudi crude would have political implications. US senator Kevin Cramer (R-ND) [last month] (https://direct.argusmedia.com/newsandanalysis/article/2098035) called on President Donald Trump to stop the tankers from unloading. Trump said he would look into it, but has made no recent comment.

If the crude reaches shore it will show up in the EIA's market balance. Latest EIA data show crude stocks at the key Cushing, Oklahoma, hub fell sharply last week, the first draw since late February, partly because of lower imports. Over the past four weeks, crude imports averaged about 5.3mn b/d, down by 26pc from the same period last year.

In the tanker market, availability has tightened because more than 10pc of the entire fleet are being used as floating storage. BRS said more could be put to use this way in the coming weeks. Argus' floating storage bookings database shows 64 VLCCs booked under short- and mid-term time-charter deals, probably with storage options, in the past couple of months but which are yet to be used for storage. Interest for such deals waned recently, because strong spot freight rates shifted the economics of floating storage for charterers.

By Nikos Kokolinakis

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