Saudi Arabia’s Export Cut Weighs Heavily on Crude Tankers
OPEC oil production
OPEC (the Organisation of the Petroleum Exporting Countries) and a few non-OPEC countries have agreed on an oil production cut up to March 2018 to support oil prices. This production cut has huge implications for the crude tanker industry.
Interested in DHT? Don't miss the next report.
Receive e-mail alerts for new research on DHT
In August 2017, OPEC crude oil production fell by 79 tb/d (thousand barrels per day) to 32.76 mb/d over the previous month. Oil production fell in Saudi Arabia, Iraq, Libya, and Venezuela.
Oil production in Saudi Arabia fell by 10.3 tb/d to 10.02 mb/d over the previous months. Due to the production cut deal, Saudi Arabia is decreasing its oil exports. Saudi Arabia is expected to cut its crude oil exports by 350,000 bpd (barrels per day) in October 2017. It was expected to cut exports by 520,000 bpd in September 2017.
Most of the oil exports from the Middle East are carried through VLCCs (very large crude carriers). A fall in exports from Saudi Arabia proves negative for the crude tanker industry, especially VLCCs. We’ve already seen a drop in VLCC rates.
Major oil producers agreed to cut crude oil production by 1.8 MMbpd from January 2017 to March 2018. OPEC’s next meeting is on November 30, 2017.
As oil supply falls, the demand for spot cargo falls too. Lower oil supply is usually negative for the crude tanker industry and companies such as Tsakos Energy Navigation (TNP), Teekay Tankers (TNK), Euronav (EURN), DHT Holdings (DHT), and Nordic American Tankers (NAT).