Americas News
U.S. Already Benefiting From OPEC Cutback Deal Via Trade To Asia
Analysts have repeatedly worried that the Organization of the Petroleum Exporting Countries' (OPEC) cutback agreement could boost prices high enough to revitalize the U.S. shale industry and undercut any benefit to overlarge stockpiles, but even though this has yet to play out, the U.S. is already profiting from the agreement via increased trade to Asia.
CNBC notes that the output limits "are expected to make it possible for U.S. producers to ply the expensive, complicated route to Asia from the United States," and last week it was reported that BP had undertaken a pilot project whereby a 16,000-nautical-mile sea route involving seven tankers and several transfers were used to transport 3 million barrels of crude from Texas to Asian customers.
Reuters analysis shows that BP's tankers capable of carrying 800,000 barrels sailed around South Africa to Malaysia, where the oil was distributed across Asia; additional transfers brought the cargo to Thailand and Australia.
More shipments like this are expected to be worth the time and money, given that tanker rates are expected to fall as the OPEC production cuts leave the market with more vessel capacity than it needs.
Additionally, the U.S. has built up its infrastructure to bring crude into the Gulf, which makes it easier for integrated companies such as BP to buy crude from multiple sources and lump it into a single large shipment.
Yet another factor is the price spread between U.S. crude and more expensive international benchmarks: "Recently, due to the OPEC decision, that has blown that spread out again, and that will only further serve to incentivize higher exports," says Matt Smith, director of commodity research at ClipperData.
But while the U.S. is shaping up to be the big winner in the wake of the OPEC cutback agreement, oil-hauling supertankers overall are anticipating the worst earnings since 2013 because of the cuts.
According to eight shipping analysts surveyed by Bloomberg, very large crude carriers will earn an average of $25,000 a day next year, or 12 percent lower than anticipated before the cartel agreed to reduce production by enough to fill four ships a week.
Frode Morkedal, an analyst at Clarksons Platou Securities, remarked, "This can lead us back to the market in 2013," adding that if the OPEC cutback are enacted, "rates will crash because it will lead to higher oil prices, lower demand and less trade."
But not every expert is convinced shipping will suffer in the foreseeable future: Jonathan Staubo, analyst for Fearnley Securities AS, told Bloomberg, "We already expected lower oil production growth next year, and the loss of volumes overall could to some extent be offset by a longer distance trade from the Atlantic to the Far East for tankers."
Earlier this week it was reported that Trafigura is also exporting 2 million barrels of U.S. oil to Asia, causing Bjarne Schieldrop, commodities analyst for SEB, to state, "OPEC is putting U.S. shale oil to the test... (and) we will truly see what it can deliver."
