Saudi Reports Drop In Exporting Oil to US, But Will It Last?

On Friday, oil prices continued to move higher, this time on the heels of Saudi Arabia announcing that the volume of oil it will export to the US is falling and will remain at lower levels. A consulting firm does insist, however, that the data shows this drop will be only a temporary one.

As such, traders focused on these comments because higher import levels have long been an important part of soaring US crude stockpiles and that, in turn, has pulled down oil prices. A ministry official of Saudi Arabia said, on Thursday, that crude exprts to the United States which will fall by approximately 300,000 barrels a day—this month alone—with total shipments holding at these levels over the next few months.

Indeed, Again Capital energy hedge fund founding partner John Kilduff notes, “It’s been the wildcard every week.”
Bloomberg survey analysts see this price of benchmark Brent crude—a metric which trades at only a small premium against Russia’s Urals export blend—jumping up 16 percent over current levels by the end of this year. The 10 percent decline in March, amid supply woes, continues to worry the market. Russia, of course, is a key partner in the deal as well as a participant in present Kuwait talks, which might compound the anxiety.

According to Rabobank emerging market currency strategist Piotr Matys, “The Finance Ministry, the cabinet and the central bank are leaning on the cautious side in terms of their expectations regarding growth, driven still to a large degree by oil,. It’s better to be conservative and to be surprised on the upside than too optimistic and end up disappointed.”

On the other hand, ClipperData director of commodity research, Matt Smith, argues, “Our projections do not support the comments coming out of Saudi Arabia. The conclusion really is that even though we’re seeing lower arrivals in the coming weeks from Saudi Arabia arriving on U.S. shores, we’ll see those imports picking up at the end of April and early May back to normal levels.”

He goes on to say, “We’re certainly going to see more comments out of members of OPEC in the next six weeks leading into its main meeting with respect to discussing the possibility of extending production cuts through balance of 2017.”