ANALYSIS: Soaring US imports of Saudi oil set to continue


LONDON -- US imports of Saudi crude have soared this year, and look set to continue to climb, shipbrokers and Petrol Tankeranalysts told Dow Jones, surprising many market watchers.

Although the increase in Saudi oil exports has been well reported in recent months, many investors expected additional volumes to travel to Europe and Asia, areas that are most likely to be affected by tightening sanctions against Iran.

According to the International Energy Agency, Saudi Arabia's oil production rose to 10 million bpd in February - its highest in 30 years - with most of this additional supply heading to Europe and Africa.

But the US has also been taking extra barrels, data show.

According to the Energy Information Administration, the US increased its imports of oil from Saudi Arabia some 38% in the first 10 weeks of 2012, and shipping fixtures show this trend is set to continue.

Vela International Marine Ltd., the shipping arm of Saudi Arabian Oil Company, or Saudi Aramco, is scheduled to take 11 supertankers Westbound at the end of March and in early April, shipbrokers said.

The very large crude carriers, or VLCCs, are capable of carrying up to 22 million bbl of oil.

"This is the first time in several years for Vela to hit the market with such volume--and in such a short timeframe," Omar Nokta, managing director at Dahlman Rose & Co., told Dow Jones Newswires.

"In 2011, Vela fixed 1 VLCC to the US every other month," Nokta said.

Vela was not available to comment.

According to UK-based tanker tracker Oil Movements, Vela's westbound oil shipments from Saudi Arabia are at their highest level in three years.

Although the destination is stated as west, the majority of that crude typically ends up in the US Gulf, Oil Movements head Roy Mason told Dow Jones Newswires.

"Putting more oil into the Atlantic Basin is a message that the Saudis will do something," he said as sanctions tighten against Iran, putting increasing pressure on oil prices as supply concerns mount.

This has left politicians in the US scrabbling for ways to bring down the cost of oil ahead of this year's presidential election.

Washington has pressed Saudi Arabia to commit to supplying extra oil to the market when more sanctions against Iran kick in later in the year, while reports of a possible release of emergency stocks have pressured oil prices lower this week.

Mason said the levels of westbound Vela oil shipments for March were around double those seen in the same period in the past two years.

"It's unusual by recent standards but not historically," Mason said, adding that Saudi crude shipments to western destinations were around this level about five to six years ago before the recession in the US.

Mason said the crude could be going into the Motiva Port Arthur refinery in Texas, which is in the process of commissioning units that will increase the plant's throughput capacity by 325,000 bpd. Motiva is jointly owned by Saudi Aramco and Royal Dutch Shell.

Furthermore, the size of the shipments could be a sign of an anticipated rise in US crude demand as many US refineries will be coming out of their spring maintenance in April and May, a time when facilities typically ramp up gasoline production to meet peak demand in the summer driving season, he added.

Mason said that early indications show Vela fixtures climbing in April, but the picture is as yet incomplete as the program is only just getting underway.

"It's a well-supplied tanker market so there's no scramble to fix in advance," he added.

Dow Jones Newswires

The Author