Asian refiners are losing no time reacting to a decision by OPEC and Russia to extend their agreed production cuts to all of 2018, ordering more oil from the Caribbean and Gulf of Mexico in a move that will result in lost OPEC and Russian market share.
Output cuts aimed at tightening the market to prop up prices have been in place since January and were to expire in March 2018, but the Organization of the Petroleum Exporting Countries (OPEC), together with non-OPEC producers including Russia, extended those cuts on Thursday, to cover all of 2018.
Despite this, oil supplies remain ample. Even before the official announcement on Thursday to extend the cuts, refiners in Asia, the world’s biggest consumer region, had already put in enquiries for oil shipments from the Gulf of Mexico and the wider Caribbean, particularly from the United States, Mexico, Venezuela and Colombia, tanker operators said.
“There have been many enquiries from Asia for oil tanker shipments from the Gulf of Mexico and Caribbean. Now that we know OPEC’s cuts will be extended, these enquiries are being turned into orders,” said a broker who specializes in long-haul crude oil shipments, declining to be named as he was not authorized to talk to media about ongoing negotiations.
OPEC’s and Russia’s biggest problem with cutting output has been that it has led to higher US production and market share.
Shipping data in Thomson Reuters Eikon shows oil shipments from the Gulf of Mexico and the Caribbean to Asia’s consumer hubs of China, Japan, South Korea, Taiwan and Singapore have already soared from around half a million barrels per day (bpd) in January, when the OPEC-led cuts were implemented, to over 1.2 million bpd in November and December.
The biggest increase in exports to Asia have been coming from the United States, where output is soaring thanks to shale oil drillers.
“The real winners (of the cuts) will be the US producers,” said Matt Stanley, a fuel broker for Freight Investor Services in Dubai.
Consultancy Rystad Energy expects US output to reach 9.9 million bpd this year, bringing it close to levels of top producers Russia and Saudi Arabia.
