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Saudi Aramco Oil Update: Oil Supplies Less Than Reported & Market Expectations

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Our published note on 27 September 2019 had us forecasting that Saudi Aramco assurance to the markets of full production by end of September to be a far fetch to what is commercially possible given the repair works that will take months instead of weeks to be finished.

We have taken on an assumption of 2M Saudi Aramco reserves rundown rate that is necessary to meet full customer commitments and thus expects a tighter crude oil supply as a result of a fundamental shift to Saudi Arabia position as the major OPEC supplier since the September attacks.

It has been a month since our Crude Oil market note, and we hereby supply an update to readers on the fundamental changes to the Saudi Aramco oil situation from our commodities analytics research team.

Saudi Crude Oil Production Dynamics

Saudi Arabia’s crude oil exports for August 19 remained unchanged at 6.88M barrels per day month on month, official data from JODI (Joint Organisations Data Initiative) showed on 17/10/19.

Given 2-month data delay from the JODI which complies global oil producers supply survey, we decided to take look to the monthly OPEC survey and daily Ras Tanura loading data to get a peep into Saudi Arabia September 19 and October 19 numbers to understand the situation on a first-hand basis.

(Official OPEC survey data showed a decrease from 9.6M BOD to 9M, a cut of 600k)

Saudi Arabia via OPEC Survey has reported a 9.1M per day crude oil production for September given the disruptions started on 14/9/19, a 600k barrels per day drop in oil production.

Given that this is a 16-day (post-attack) number, we can safely deduce that Saudi Arabia suffered an official post-attack disruption rate average of around 1.2M barrels per day since the attacks. Thus, using this official OPEC survey assuming all factors unchanged in October, we are looking at roughly an 8.5M per barrel production rate. [9.6M – 1.2M: 8.4M per day]

Our baseline assumption of 8.4M barrel per day is close to OPEC knowledge of Saudi Arabia Crude oil production based on secondary sources in their October 2019 Report of around 8.5M barrels.

(OPEC data based on secondary sources // Monthly report October 2019)

Official Saudi Aramco comments in September showed the following.

30/9/19 Saudi Aramco Chief Al-Buainain: Restored oil production of around 10 million barrels per day within 10 days and said it was on track to regain its maximum capacity of 12 million bpd by the end of November.

Given our analysis from above, it seems unlikely what Aramco official statement is possible given their input via the September OPEC Survey numbers. We think it’s either the OPEC Survey is inaccurate, or Aramco is lying.

We look further into the Ras Tanura daily loading data for both loading and discharge to further verify Saudi Arabia official comments.

Ras Tanura Daily loading data

Ras Tanura Oil terminal and port facilities facilitate exports for 85-90% of monthly Saudi Arabia to global customers. There are another 6-7 other ports in Saudi Arabia which account for just 10% of the exports, and thus we decide to focus our analysis purely on Ras Tanura.

(Ras Tanura Oil Terminal / Port)

We first take a look at the past 6 months (1/4/19 – 28/10/19) export data from Saudi Ras Tanura to global ports.

Data from the above chart as follows below.

  • Apr 19: 201M Barrels
  • May 19: 205M Barrels
  • June 19: 201M Barrels
  • July 19: 199M Barrels
  • August 19: 200M Barrels
  • September 19: 185M Barrels
  • October 19: 183M barrels to date

From the above export data, we can agree that Saudi has made a full commitment to customers in September and October, albeit lower export numbers by around 500k barrels per day, post-Abqaiq attacks.

We look next into the Saudi Arabia total ports discharge data to see if there are any abnormalities.

Saudi Arabia All ports discharge data

Saudi Arabia has in the past 6 weeks denied reports of seeking for oil supplies from other countries.

After attacks, Saudi Aramco trading arm seeks oil to meet deliveries: Reuters sources 24/9/19.

We move on next to Saudi Arabia import data for crude oil, which we found below interesting.

(Saudi Arabia All ports discharge data)

Saudi Arabia all ports discharge data for the month of October 19 which reflects full month post-Abqaiq attacks saw a spike in Crude oil movement of 27M barrels, a rise from 14.5M Barrels compared to August 19 which is a rise of 86%.

This figure is also above the 2-year average number of 13M barrels of monthly discharge data. We reckon possibility of such a spike due to new imports of Crude oil from other OPEC producers, also side increased activity due to at-sea crude oil loading which does not capture loading port tonnages and also the requirement for increased refining works due to damage at Abqaiq and Khurais refining capacity.

Summary

The above findings show no means by which the Saudi Aramco situation is fully resolved as they have mentioned which is likely to calm investors looking at the IPO event.

While the truth to the story will only be found when Saudi Arabia announces their existing crude stocks, we have used the findings in this report to showcase how speculators or investors in oil-related firms can use data available to the public to research on the industry to make better market decisions.

(Saudi Arabia Crude Stocks / Monthly Drawdown rate)
  • Assumption September/October crude oil production: 8.4M barrels per day
  • September/October Crude oil monthly exports: 6.2M barrels (Basis 185M Barrels per month)
  • August 2019 Saudi Arabia Direct Crude Burn: 562k barrels per day
  • August 2019 Saudi Arabia Demand for Oil products: 2.8M barrels per day.
  • New Assumption for net daily drawdown: 8.4 – 2.8 – 0.56 – 6.2M: Negative 1.16M Barrels per day

From the assumption scenario above we used basis the latest data we have from the OPEC survey and Ras Tanura export data, we can conclude safely to expect a 1M per barrel drawdown rate, by which we estimate the current Saudi Arabia crude stocks to be under the 100M barrel mark.

Trading Idea

We remain bullish Brent oil price as the December 2019 OPEC meeting would likely add fuel to the bullish case.

RUSSIA’S ENERGY MINISTRY SAYS OPEC+ WILL TAKE INTO ACCOUNT SLOWDOWN OF U.S. OIL OUTPUT GROWTH WHEN IT TAKES DECISION IN DECEMBER – TASS

Brent crude oil prices have recovered from the recent lows of $57 while we expect further upside momentum as the true state to Saudi Arabia crude oil supplies is revealed in the months ahead.

(ICE Brent Crude Oil Continuous)

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