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Sunday, November 18, 2018

Middle East activity

According to the Organisation of Petroleum Exporting Countries (OPEC), the demand for OPEC crude in 2007 is expected to average 31.0 mbd, an increase of 0.1 mbd over the previous year. In 2008, the demand for OPEC crude is expected to average 30.8 mbd, a decrease of 0.216 mbd.


Due to significant downward revisions to Mexico and Azerbaijan supply in the third quarter, non-OPEC supply growth in 2007 has been revised downwards slightly to stand at 0.84 mbd over the previous year. For 2008, non-OPEC supply growth sees a minor downward revision to stand at 1.04 mbd over 2007, as some of the 2007 revisions have been extended into 2008 and more data has become available for project start-ups and ramp-ups.


Growth in OPEC Natural Gas Liquids (NGLs) and non-conventional oils has been left unchanged at 0.30 mbd in 2007 and 0.52 mbd in 2008. OPEC crude oil production averaged 30.39 mbd, a decline of around 92,200 b/d from the previous month, as production from Iraq underwent a significant decline of 147,300 b/d to average 1.99 mbd.


OPEC spot fixtures increased 1.0 mbd in August to average 12.7 mbd, maintaining a steady 67.5% of global spot fixtures. OPEC sailings remained nearly steady with only a minor increase. The crude oil tanker market remained bearish with spot freight rates for VLCCs declining to the lowest level so far in 2007 due to plentiful tonnage supply. Similarly, suezmax tankers displayed further weakness on the back of limited activities and increased tonnage. For the clean market, limited arbitrage affected the market with East of Suez spot freight rates remaining steady, while West of Suez rates dropped on all reported routes, with Caribbean/U.S. rates displaying the largest decline. 

According to OPEC, the spot tanker market came under pressure on almost all of its routes. August marked the worst month so far for owners in the spot market with rates reaching the lowest level in 2007 on almost all reported routes, thwarting owners’ hopes that market bottom had been reached in July. On some routes, weekly rates reached lows not seen for four years as increased tonnage availability on the back of a flurry of new deliveries became the market driver and charterers found themselves in a position to squeeze the market further.


The graphs above show that tanker sailings from the Middle East have declined in both 2006 and so far in 2007, as has spot chartering. Middle East spot chartering, East plus West, makes up some 40% of total tanker sailings, according to the OPEC figures, which are based on "Oil Movements" and Lloyd's Marine Intelligence Unit.


Despite increased reported spot activity in August, both East and West, freight rates declined. The half-a-million barrels per day extra crude oil that OPEC has agreed to produce, lifted from the Middle East and transported to LOOP in VLCCs Cape/Suez, would require some 17 VLCCs. This is a maximum as some of the oil will be carried shorter distances and some of the extra quota may already have been taken out.


Contact: Erik Ranheim