From the growth of China’s ‘teapot’ refiners to the resumption of U.S. crude exports, vessel tracking is providing much faster insight into the latest trends in global oil flows.
Oil flow data comes in many forms, but vessel tracking is the most significant of them for helping organizations identify risk hotspots and emerging trends.
This powerful tool provides reliable, real-time information that is critical for a transparent and independently sourced oversight of supply and buying patterns.
Using the Thomson Reuters Oil Research & Forecasts proprietary vessel tracking tool, a recent webinar involving our analysts from Europe, Asia and North America discussed trends across key geographic regions.
Topics included the inflows of crude from the Middle East into Europe, the rise of privately-owned independent refiners in China — known as ‘teapots’ — and the impact of the United States recently ending its lengthy ban against crude oil exports.
Here are some of the highlights from the webinar:
Middle East surge
One of the most interesting recent trends from the monitoring of oil flow data has been the 30% jump in the arrival of Middle East crude into Europe during August, compared to May.
I believe this is likely to be the result of several factors, including favorable official selling prices for European buyers, low freight rates and the impact of outages in West Africa.
As a result of these converging factors, Middle Eastern barrels have become increasingly attractive for European refiners.
In particular, Iraq and Iran have been the most successful in capturing market share and pushing more barrels into Europe compared to the same period last year.
West Africa has been the largest casualty of market oversupply, with militant activity and technical issues two factors that have pushed European customers towards more stable producers.
Turning to Russia, the country has been steadily increasing domestic production and is expected to produce more crude this year than at any time in the last 30 years.
Exports to Europe may not be able to take this extra supply, so Russia is making inroads into Asia, capitalizing on rising demand from teapot refiners.
Privately owned independent refiners in China, known as teapots, are driving the country’s voracious appetite for crude, according to Emril Jamil, Senior Analyst, Oil Research & Forecasts Asia.
New crude import licenses have been given to 12 teapots and the government has issued quotas to buy up to 54.59 million mt of crude per year.
Jamil explains that “this is fresh demand, as the teapots have previously used mostly straight-run fuel oil as their feedstock of choice”.
More licenses are expected to be given out by the end of the year and beyond, withat least another eight players waiting.
He also points to two other factors driving demand in China, including the government’s objective of 90 days of supply cover resulting in about 31.97 million mt filling its strategic petroleum reserves (SPR) by the start of the year.
The current low-price environment also continues to make crude attractive.
China’s SPR imports have slowed in recent months, with Jamil comparing this to a tug of war as China’s teapot refiners appear to be increasing crude imports at the expense of SPR.
While the battle for market share to export to China continues, Jamil notes that there is possibly a new ‘kid on the block’ as Angola passed both Saudi Arabia and Russia as China’s top crude supplier in July.
Oil production in the U.S. reached a peak of 9.6 million bpd in April 2015 in order to meet domestic demand and to grow inventory, causing the Brent WTI spread to narrow and eventually drag oil prices down. This has made imports an attractive source again.
But according to Shoko Tsuruga, Senior Analyst, Oil Research & Forecasts Americas, an analysis of global flows data shows that import trends differ vastly between refining hubs.
Turning to exports, Tsuruga highlights that in December 2015 the U.S. lifted its ban against U.S. crude oil trade after 40 years: “Crude exports can once again take place, but where will this crude be going?
“In 2015, most exports were going to Canada, but Canada is no longer the only option for the U.S.”
She mentions that disruptions in Nigeria and Libya have caused instability, making the U.S. a viable supplier for European refiners and, further, that as Latin American countries including Venezuela, Colombia, and Brazil suffer from the crash in oil prices and slash production investments, the U.S. may become an important source for crude.
Tsuruga concludes that the U.S. is a growing hub for both imports and exports.