Saudis are claiming a drop in oil exports to United States, but data suggest it won't last

A gas flame is seen in the desert near the Khurais oilfield, near Riyadh, Saudi Arabia.
Ali Jarekji | Reuters

Oil prices moved higher Friday after Saudi Arabia said the amount of oil it's exporting to the United States is falling and will stay low, but a consulting firm's data show the drop will be only temporary.

Traders focused on the comments because high import levels have played a large part in surging U.S. crude stockpiles, which have dragged down oil prices.

"It's been the wildcard every week," said John Kilduff, founding partner at energy hedge fund Again Capital.

A Saudi energy ministry official on Thursday told Reuters that crude exports to the United States will fall by 300,000 barrels per day this month and total shipments would remain around March levels in the coming months.

Tanker tracking firm ClipperData does indeed expect the United States to import less crude from Saudi Arabia in the coming weeks, but March loadings of crude oil appear to be headed west from the country — and that likely means the United States. Factoring in a typical seven-week delivery schedule, those Saudi barrels will reach the United States in about a month.

"Our projections do not support the comments coming out of Saudi Arabia," said Matt Smith, ClipperData's director of commodity research.

"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."

U.S. stockpiles of crude are at records, so a drop in imports is bullish for oil prices.

A decline would also contribute to efforts by OPEC and 11 other producers, including Russia, to shrink global crude inventories through coordinated output cuts. Saudi Arabia has led that effort.

Those cuts boosted oil prices back above $50 a barrel late last year. But prices have tumbled in recent weeks as signs of resilient shale oil production and brimming stockpiles in the United States have offset faith in OPEC's production curbs.

Oil could collapse if OPEC doesn't keep its act together

Smith said the Saudi comments appear to be an evolution in the rhetoric that Riyadh and other influential crude exporters have used to try to put a floor under oil prices at times. The market has come to refer to this as OPEC's "verbal intervention."

"It seems like it's just one more way that they have of trying to calm fears in the market," he said.

The Saudi Ministry of Energy, Industry and Mineral resources did not immediately return a request for comment.

If the ClipperData figures are born out in April, it would show the Saudis' words are not being met by their actions, said Andy Lipow, president of Lipow Oil Associates.

"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," he said.

OPEC members are scheduled to meet in May, when they will review the results of their output agreement and decide whether to extend it by another six months.

Chinese demand and the 'East-West Swing'

Arabian Peninsula producers typically alternate the direction of crude oil shipments on massive, long-haul tankers every few weeks, a process called the east-west swing.

In January and February, there was a strong bias toward sending crude east to Asia, Smith said. But that has now flipped, he said, and loadings are favoring the western route to the United States.

At this point, demand is likely becoming a factor, according to Smith.

While Chinese data are notoriously opaque, near-record crude imports into the country in the first two months of the year may limit the country's ability to sop up more of the world's supply, Smith said. China's independent refiners may be butting up against state-imposed import quotas following January and February's high shipments.

Lipow noted that the China National Offshore Oil Corp. is expected in May to complete a refinery expansion in southern China that could absorb about 80,000 barrels a day of Saudi oil. That alone would account for nearly a third of the 300,000 barrel drop in exports to the United States, he said.

It's also unclear how much Saudi oil found its way into China's strategic petroleum reserve, Lipow added.