A few days ago, the Maran Apollo, a 1,100-feet long oil tanker, left the U.S Gulf of Mexico for the Chinese port of Rizhao hauling a cargo of two million barrels of U.S. crude. Sitting for almost two months, the supertanker held demand-less crude during the coronavirus outbreak. This crude sitting on the tanker is known as medium-heavy sour crude and is now in high demand because of its higher content in sulfur and denseness. Sour crude is typically from Canada and the U.S. Gulf Coast whereas West Texas Intermediate (WTI) is a “sweet” crude oil. WTI, which is typically lighter and is less expensive to produce. Known as “sour” which is typically undesirable for both processing and end-product quality, it’s the kind of oil that Saudi Arabia and its allies produce. Urals of Russia and Arab Light from Saudi Arabia are normally two of the most widely consumed in today’s market, but crude is in increasingly short supply due to record output cuts by the two nations and their allies.
Much like some of the most daunting roller coasters in the world, crude oil has provided adrenaline building hill climbs, steep drops, twists, and turns. Historically, you will be hard pressed to find a more erratic fuel market than the one we have witnessed over the past few months. COVID-19 has sparked drastic demand destruction, the warm winter months have curtailed heating oil demand, wet seasons are delaying farming, and OPEC+ cannot seem to agree on the production levels of crude to help negate the excessive supply on a global scale.
The sharp decline in oil demand from China due to the coronavirus is causing oil cargoes to be stranded off the country’s coast and across Asia. Last week, OPEC lowered its forecast for global oil demand by nearly a quarter million barrels per day as the pandemic of the coronavirus has crippled fuel consumption in China. Demand from China, the world’s largest importer of oil, has dropped by three million barrels per day which is twenty percent of Chinese consumption.
The United States has significantly ramped up oil production over the past decade, but just how far have they come? Depending on how you view oil production, the U.S. has just become a net oil exporter for the first time in 70 years. Bloomberg describes the U.S. as a net petroleum exporter, but Forbes is quick to point out that this includes both crude oil and finished products, as opposed to just crude oil.
A recent survey conducted by Reuters found that OPEC oil output has dropped during the month of November from October by 110,000 barrels per day (bpd). The cause is from Angola Production fell due to maintenance, along with Saudi Arabia halted supply output before the initial public offering of state-owned Saudi Aramco.
Today, oil prices dropped to $83 a barrel after the United States said it is actively considering waivers on the oil sanctions against Iran, potentially easing the current strain on supply and allowing Iranian oil exports to keep flowing.
Yesterday, oil prices rallied towards their highest levels this year after the Department of Energy (DOE) reported a weekly drop in US crude oil inventories. Also, the prospect of losing Iranian supply added to concerns over the delicate balance between consumption and production.
Earlier this week the EIA stated that oil terminals on the Texas Gulf Coast exported more crude oil than they imported in April of this year; surpassing imports by 15,000 bpd. A month later, the spread between imports and exports in Texas widened to 470,000 bpd which contributed to the U.S.’ record setting crude oil export total of 2 million bpd. The Texas gulf coast had previously been credited with approximately half of the United States’ crude oil exports until this upsurge, bringing the area’s contribution up to 70% in May of 2018.