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50M Barrels of Saudi Crude Moving Towards U.S. With Presumably No Space To Store Them

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50M Barrels of Saudi Crude Moving Towards U.S. With Presumably No Space To Store Them

Click to see full-size image

In recent days there’s been reports that the Saudi company Bahri had sent a large number of its oil tankers to Europe and the US.

However, an analysis of GoRadar.ru shows that this isn’t exactly the case.

Regardless, there is a very large number of tankers, especially in the Gulf of Mexico.

50M Barrels of Saudi Crude Moving Towards U.S. With Presumably No Space To Store Them

Locations of all tankers around the globe. Click to see full-size image

Their flags are mainly: Bahamas, Liberia, Marshall Islands, etc. Some have Destination For Orders … that is, they expect an order only when they are already travelling towards arrival ports. There are also British, American and even Croatian flagged tankers.

It, furthermore, appears that Saudi Arabia is fully aware of this and is doing even more – currently there is a crisis of crude storage facilities in the US.

Regardless of that fact, approximately 50 million barrels of Saudi oil are on their way to the United States and due to arrive in the coming weeks, piling even more pressure on markets already struggling to absorb a glut of stocks, Reuters and MarineTraffic reported.

Shipping data showed the more than 20 supertankers – each capable of carrying 2 million barrels of oil – were sailing to key U.S. terminals, especially in the Gulf of Mexico.

Three separate tankers, also chartered by Saudi Arabia, were currently anchored outside U.S. Gulf ports.

“This could prove to be a very expensive exercise for Saudi Arabia as whatever happens with the cargoes and the tanker owners will need to be paid demurrage (for the ships), and those costs would have been locked in when the market was higher to secure the charters,” a shipping source of Reuters said. “While this is an expensive gamble for the Saudis, shutting off production would have been proved even more costly.”

Additional costs, known as demurrage, were estimated at $250,000 a day based on rates in March when a lot of vessels were booked. Daily tanker rates soared to nearly $300,000 in the past month, and though they have retreated to $150,000 a day in the week starting on April 20th. This is quite a significant cost, for 24 supertankers that have might have no final destination as of yet.

In the preceding days, US officials have been saying that Washington is considering blocking Saudi shipments of crude oil, or putting tariffs on those shipments, adding to difficulties for the cargoes now on the water.

In response, Saudi Arabia may look to divert the cargoes to other locations, if the US really imposes a ban, according to European and Asian oil traders.

“Europe looks full, but surely if the Saudis offer it at really cheap levels, buyers would take it,” a source with an international trading firm told Reuters. “Some still have storage spaces or may agree to float it for some time.” A source at a separate oil trading firm active in Asia said they expected many of the barrels that were bound for the United States to flow to the region if exports were blocked.

A Reuters source at a separate oil trading firm active in Asia said they expected many of the barrels that were bound for the United States to flow to the region if exports were blocked.

Aramco also “offers its larger customers with refineries in multiple regions of the world optionality to take their crude purchases from Aramco into the region,” the company said in a statement to Reuters. “Changes in ship destinations are routine in the course of our business, particularly in a company of our scale,” it said.

Meanwhile, in the US oil refiners appear to be pulling back form the oil markets.

“There is more reluctance now with fresh shipments as refiners in the U.S. have no homes for the oil,” another Reuters shipping source said.

Spokespersons for Marathon Petroleum, Exxon Mobil and Phillips 66, among the biggest U.S. buyers of Saudi crude, declined to comment. Chevron did not immediately comment.

Most of the Saudi oil buyers are along the West Coast in the US, and on April 10th their storage was 65% full, it’s nearing 100% as of April 23rd. The Gulf of Mexico coast was about 55% full back on April 10th.

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