Saudis ready to dump cheap oil by the boatload — and more!

Saudi Arabia’s state-run shipping company has hired multiple very large crude carriers to carry all the extra oil it plans on exporting next month—a rare move indeed for the shipping company that sports its own fleet of 41 tankers, according to Bloomberg sources.

Bahri, as the Saudi’s shipping company is known, has booked passage for its crude oil on three VLCCs, each with the capacity to haul 2 million barrels of crude. The preliminary bookings are heading to the US Gulf Coast, the sources say—but the bookings could still fail…

Next month, Saudi Arabia has plans to increase shipments of crude to its prized market, Asia, who will be more than happy to take on more oil at the substantial discount that the Saudis are selling their oil for as part of its oil war strategy. However, trips from to the US take 40 days, and Bahir’s own tankers would not return to Saudi Arabia in time to load these extra volumes.

But all that could change in the blink of an eye.

More tankers. More oil. Cheaper retail. What could possibly go wrong?

33 thoughts on “Saudis ready to dump cheap oil by the boatload — and more!

  1. Yee-haw says:

    Saudis sell oil at $25 in market share grab from Russia : The price war between the top two producers of crude is heating up as oil has worst week since 2008 financial crisis. https://www.aljazeera.com/ajimpact/saudis-sell-oil-25-market-share-grab-russia-reuters-200313144749965.html
    Oil Price Crash: 50% Of U.S. Shale Could Go Bankrupt https://oilprice.com/Energy/Crude-Oil/Oil-Price-Crash-50-Of-US-Shale-Could-Go-Bankrupt.html The U.S. oil industry is in a historic crisis that has the ingredients to be far worse than the 2008 financial meltdown. A decade ago, the shale industry barely existed, and falling oil prices cushioned the blow to the U.S. economy by making energy cheaper. Today, an oil market bust could pretty quickly plunge Texas, North Dakota and Appalachia, among other places, into a recession.
    Reportedly around 80% of shale DUCs (drilled but uncompleted wells) currently have break-even oil prices below $25 for West Texas Intermediate ($30 Brent).
    New Mexico’s most recent revenue estimates pegged oil prices for the budget year that ends in June to average $52 per barrel. Just a $1 change in the average annual New Mexico price of oil has an impact of roughly $22 million on the state general fund, according to the State’s Legislative Finance Committee. https://www.abqjournal.com/1429497/governor-vetoes-infrastructure-bill-as-oil-prices-plummet.html
    Trump Prepares Aid Package To Relieve U.S. Oil Producers (March 9th) https://oilprice.com/Energy/Oil-Prices/Trump-Prepares-Aid-Package-To-Relieve-US-Oil-Producers.html
    Meanwhile in Iran: https://oilprice.com/Energy/Energy-General/Saudi-Arabias-Archenemy-Is-Taking-Advantage-Of-The-Oil-War.html

  2. p/s says:

    “Saudi Booking Spree Sends Tanker Rates Soaring” https://gcaptain.com/saudi-booking-spree-sends-tanker-rates-soaring/ Reportedly the majority of the 25-30 tankers hired by the Saudis are Very Large Crude Carriers, or VLCCs, each designed to transport 2 million barrel cargoes. Also “Traders are inquiring about crude tankers to store oil, following the return of a so-called super-contango structure. In such markets, companies can buy oil cheaply, store it on ships for a period of time, and then sell it at a higher price later, potentially making millions.
    Frontline [the world’s largest oil tanker company https://en.wikipedia.org/wiki/Frontline_Ltd. ] said earlier in the week that both oil traders and majors had been inquiring about such floating storage options. Vitol and Shell were among the companies looking to book ships with options for storage this week, according to fixture reports seen by Bloomberg. Product tanker company Torm A/S said it has recently received several floating storage requests across various fuel markets. The surge in freight rates has diminished the appeal of storing.”

  3. Foxy Loxy says:

    “Trump emerges as oil’s white knight after worst week since 2008” (FOX news) https://www.foxbusiness.com/markets/oil-market-gets-white-knight-after-worst-week-since-2008
    “The battered U.S. oil market may have just received a lifeline from President Trump after crude prices posted the worst week since 2008 hugging the $31 per barrel level, down 48 percent so far this year.
    “Based on the price of oil I have also instructed the Secretary of Energy to purchase, at a very good price, for large quantities of crude oil for storage in the U.S. Strategic Reserve, we are going to fill it right up to the top, saving the American taxpayer billions and billions of dollars and helping our oil industry,” Trump stated on Friday.
    The move, according to Phil Flynn of The PRICE Futures Group, should boost oil prices from historic lows.
    “This could send prices back into the $40s if the buyers are there,” said Flynn, who is also a FOX Business contributor, when reached for his reaction. “They [the U.S.] can buy oil at the lowest price in years,” he added.
    The Strategic Petroleum Reserve is the world’s largest supply of emergency crude oil, as described by the DOE, and was established as a backup facility to protect the U.S. in the event of market disruptions or potential shortages.”

  4. Update says:

    “Oil tankers drop anchor as traders see profit in price rout” https://www.businesstimes.com.sg/transport/oil-tankers-drop-anchor-as-traders-see-profit-in-price-rout In the height of the 2008-09 global recession, traders kept in excess of 100 million barrels at sea in a mix of contango trades and bets that prices would recover.
    Reportedly the state of New Mexico was counting on an oil price of $51 a barrel for the fiscal year that starts July 1. The current price is in the low 20’s. Each dollar drop represents a loss of about $22 million to the state’s $7.6 billion general fund budget.

  5. Pandora says:

    “US to send envoy to Saudi Arabia as Texas suggests oil output cut : Oil prices have lost more than half their value in the last two weeks as Saudi Arabia and Russia kicked off a price war.” https://www.aljazeera.com/ajimpact/send-envoy-saudi-arabia-texas-suggests-oil-output-cut-200320230425630.html “…The hope is that Trump could negotiate with Saudi Arabia and Russia and convince them to match cuts with a similar cut in production in Texas, said Ryan Sitton, a commissioner with the Texas Railroad Commission, the body that regulates the state’s oil and gas industry.”

  6. p/s says:

    “Oil Could Crash To $10 As World Runs Out Of Storage” (3/19/20) https://oilprice.com/Energy/Energy-General/Oil-Could-Crash-To-10-As-World-Runs-Out-Of-Storage.html
    …“There are no buyers,” an oil trader from the U.S. told Reuters. “Refiners in trouble, exporters in trouble, producers in trouble. This is a disaster with no end in sight.”
    “Cargoes are being severely discounted to move as there are little prospects to export and also very few options to store on ship and/or tanks,” another industry source told Reuters.
    At the time of writing, Brent crude was trading at less than $28 a barrel, with West Texas Intermediate at $22.78 a barrel. (3/18/20) https://www.reuters.com/article/us-global-oil-cargoes/glut-of-crude-swells-across-atlantic-basin-as-coronavirus-opec-hikes-bite-idUSKBN2153PM

    Live Crude Oil Price in Dollars https://www.exchangerates.org.uk/commodities/live-oil-prices/OIL-USD.html

  7. Cassandra says:

    “Global oil storage is filling up rapidly as the coronavirus pandemic reduces consumption by tens of millions of barrels per day (bpd) while leading oil producers have yet to rein in their crude output.” https://www.reuters.com/article/us-oil-prices-kemp-column/column-global-oil-storage-to-fill-rapidly-as-consumption-plunges-kemp-idUSKBN21E2BR
    “No comprehensive data exists on total storage volumes available in the petroleum supply chain or the amount unfilled at the start of the year, but the International Energy Agency (IEA) has said consumption could have shrunk by 20 million barrels per day because of the pandemic and national lockdowns.
    If that is roughly accurate, storage will be filling at the rate of 600 million barrels per month.
    And if Saudi Arabia and Russia increase their output as a result of the volume war by an extra 2-3 million bpd between them, the storage would fill even faster, at 650 million to 700 million barrels per month.
    The proportion of unused storage available to cope with the drop in consumption and unchanged production is unknown but filling quickly.
    Stocks are likely to be growing by 10% per month. On any plausible estimate for global storage, the entire supply chain is likely to be completely full within 2-4 months.”
    “Oil Tumbles Towards $20 As Glut Grows” (3/27/20) https://oilprice.com/Energy/Energy-General/Oil-Tumbles-Towards-20-As-Glut-Grows.html
    According to Bob Gallagher, a former executive director of the New Mexico Oil and Gas Association, Saudi Arabia can produce a barrel of oil for $9 per barrel.

  8. Russian roulette says:

    “There have been no contacts between Saudi Arabia and Russia energy ministers over any increase in the number of OPEC countries, nor any discussion of a joint agreement to balance oil markets,” an official from Saudi Arabia’s energy ministry said, referring to the wider grouping of oil producers.
    The comment came after a senior Russian official said on Friday that a larger number of oil producers could cooperate with OPEC and Russia, in an indirect reference to the United States, the world’s biggest producer, which has never cut production.
    “Joint actions by countries are needed to restore the [global] economy … They [joint actions] are also possible in the OPEC deal’s framework,” said Kirill Dmitriev, the head of Russia’s sovereign wealth fund. https://www.aljazeera.com/ajimpact/saudis-bowing-trump-admin-pressure-oil-price-war-200327195527029.html

    • Update says:

      LONDON, April 1 (Reuters) – Oil traders are storing as much as 80 million barrels of oil on tankers at sea, with further ships being sought as land storage sites fill up fast due to a global glut of stocks, shipping industry sources say.
      Daily tanker rates have rocketed to record highs of over $230,000 a day this week, and reached the $200,000 a day level around March 12. Traders have to pay a premium for longer term charters.
      “Owners have been able to put vessels away for 6-12 months at very attractive rates, supported by extreme floating storage economics,” broker Fearnley Securities said in a note this week. “We wouldn’t overrule seeing 100-200 VLCCs [very large crude carriers] taken off the market for the next 6-12 months.” https://www.reuters.com/article/global-oil-tankers/oil-held-in-storage-at-sea-approaching-2009-record-as-glut-builds-up-idUKL8N2BP4OA

  9. 3Card Monte says:

    “U.S. equity markets rallied Thursday as global oil prices posted their biggest one-day gain in response to President Trump saying he expects and hopes Russia and Saudi Arabia will cut production.” (FOX Business) https://www.foxbusiness.com/markets/us-stocks-april-2-2020

    Donald J. Trump @realDonaldTrump 8:32 AM · Apr 2, 2020
    “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”

    OPEC debating oil output cut of 10 million barrels a day: Report https://www.aljazeera.com/ajimpact/opec-debating-oil-output-cut-10-million-barrels-day-report-200403085042800.html
    Azerbaijan’s energy ministry says that a meeting of the OPEC group of oil producers is planned for April 6.

  10. Commentator says:

    Abu Dhabi joined Gulf states selling foreign bonds to bolster their finances in the face of falling oil and gas prices. https://www.bloomberg.com/news/articles/2020-04-08/abu-dhabi-follows-qatar-with-bond-as-oil-states-bolster-finances
    The emirate launched a $7 billion three-part sale, selling $2 billion of five-year bonds, $2 billion of 10-year debt and $3 billion of 30-year notes, said a person familiar with the matter, who asked not to be named. The deal follows Qatar, which attracted about $45 billion of orders for a $10 billion Eurobond deal on Tuesday.
    The energy-reliant economies have offered premiums to their existing securities to attract investors after the coronavirus all but shut bond markets for developing-nation borrowers in March.
    Trump’s Coming Oil Shock: Shale Can’t Cut Enough To Save Itself https://www.forbes.com/sites/anasalhajji/2020/04/08/trumps-coming-oil-shock-shale-cant-cut-enough-to-save-itself/#280c667e6ef0
    Mexico Refuses to Cut Oil Output and Is Running Up Huge Losses https://finance.yahoo.com/news/one-nation-wants-double-oil-100000158.html
    Trump Forced by Oil War Into Unthinkable Push for Higher Prices : Donald Trump is trying to do something no U.S. president has dared to do in decades: Drive up the price of oil. https://www.msn.com/en-us/money/markets/trump-forced-by-oil-war-into-unthinkable-push-for-higher-prices/ar-BB12jpjg

  11. So it goes says:

    ● “Saudi Arabia Sends Wave Of Supertankers To U.S. Ahead Of Oil Meeting” https://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Sends-Wave-Of-Supertankers-To-US-Ahead-Of-Oil-Meeting.html
    ● “The Saudi Wealth Fund Is Messing With the Market for Oil Stocks” https://realmoney.thestreet.com/investing/stocks/the-saudi-wealth-fund-is-messing-with-the-market-for-oil-stocks-15288483
    ● U.S. Oil Companies Begin Slashing Production as OPEC Decision Nears : Market factors are forcing American oil producers to reduce their output, with more cuts to come if others join the effort. https://www.fool.com/investing/2020/04/09/us-oil-companies-begin-slashing-production-as-opec.aspx
    ● China has been stockpiling oil for years. Low prices give it reason to buy more https://www.cnn.com/2020/04/08/business/oil-prices-china-imports/index.html
    ● The Trump administration plans to lease out space for energy companies to store oil in the nation’s Strategic Petroleum Reserve, according to two people briefed on the matter.
    A previous effort to buy millions of barrels for the emergency stockpile was canceled over a lack of funding. https://www.cnbc.com/2020/04/01/us-aims-to-lease-space-in-emergency-oil-stockpile-after-buying-plan-canceled-sources-say.html
    ● Texas lawmakers back $3B oil purchase to stabilize global markets, refill strategic U.S. reserve. https://www.dallasnews.com/news/politics/2020/04/07/texas-lawmakers-back-3b-oil-purchase-to-stabilize-global-markets-refill-strategic-us-reserve/ A bipartisan group of lawmakers from Texas called Tuesday for a $3 billion federal purchase of oil to replenish the nation’s strategic reserve and prop up an energy sector rattled by a price war and global drop in demand during the coronavirus outbreak.

  12. 3Card Monte says:

    “OPEC+ reaches deal to cut oil production by 9.7 million barrels per day” https://www.cnn.com/2020/04/12/energy/opec-deal-production-cut/index.html
    “Members of OPEC and their allies, including Russia and Mexico, announced Sunday that they have agreed to cut production by 9.7 million barrels a day in May and June, the deepest cut ever agreed to by the world’s oil producers. After that, the group will steadily ramp up production until the agreement expires in April 2022.” https://www.cnn.com/2020/04/12/energy/opec-deal-production-cut/index.html
    “While historic, the deal is unlikely to solve the demand crisis. The agreed reduction in output amounts to only about 10% of the world’s normal supply of oil, far below the estimates for how much demand for oil has collapsed amid the coronavirus pandemic.
    On Friday, though, Mexican President Andrés Manuel López Obrador said his country would cut its output by 100,000 barrels per day. While that amount was far less than what was proposed at Thursday’s meeting, López Obrador added that US President Donald Trump offered to cut US production by 250,000 barrels per day to compensate for Mexico. The United States is not an OPEC+ member.
    At a news conference Friday, Trump confirmed he spoke to the Mexican President and agreed to a cut, though he did not confirm the exact size. He said Mexico would reimburse the US at a later date.
    …Analysts at Goldman Sachs called the deal “historic yet insufficient,” adding that the voluntary cuts were “still too little and too late to avoid breaching storage capacity.”
    “Ultimately, this simply reflects that no voluntary cuts could be large enough” to offset the loss in demand, which they pegged at 19 million barrels per day on average in April and May.”

  13. Cassandra says:

    Oil prices tank another 21% as storage fears persist, commodity giant BP warns of a shock ‘on a scale never seen before’ https://markets.businessinsider.com/news/stocks/oil-price-fall-again-on-fears-global-storage-running-out-2020-4-1029137080 Oil prices had recovered from historical lows in recent days, but on Monday oil prices plummeted 30% after United States Oil Fund, one of the biggest exchange traded funds in oil announced it would sell all futures contracts for delivery in June over a four day period.

    “Trump Could Use ‘Nuclear Option’ To Make Saudi Arabia Pay For Oil War” https://oilprice.com/Energy/Energy-General/Trump-Could-Use-Nuclear-Option-To-Make-Saudi-Arabia-Pay-For-Oil-War.html “…it may be that Trump will use the threat of such tariffs on Saudi Arabia, as his mercurial reputation may work to convince the Saudis that he is unpredictable enough to impose such taxes, regardless of the short-term economic consequences. Even as it stands, he needs to do something as around 44 million barrels of Saudi crude are expected to reach the U.S. over the next four weeks, according to oil industry and shipping data. This is around four times the most recent four-week average, according to EIA records, and it is mostly due to be delivered to the already overwhelmed Cushing delivery point. Republican Senator Kevin Cramer of North Dakota, who has advised Trump on energy issues, has been calling on the White House to take action to stop the very large crude carriers from unloading, and several senators and congressmen have threatened to vote to withhold military aid to Saudi Arabia. Trump, for his part, has so far only said that he will “look at it,” referring to stopping these new imports.”

  14. 3Card Monte says:

    U.S. buyers of Saudi Arabian crude oil cancelled at least seven April-loading tankers after a jump in freight costs, two industry sources said, likely to result in lower-than-expected shipments from the world’s top exporter.
    The move shows how some buyers are not rushing to take extra oil despite a slide in prices this month to below $16 a barrel, the lowest this century, as demand has collapsed following government measures to contain the spread of the coronavirus. https://gcaptain.com/saudi-crude-buyers-cancel-at-least-7-supertankers-after-freight-hike-sources/
    Even after the cancellations, the volume of April-loading Saudi crude heading to the United States is still set to increase, the source said. Saudi exports to all destinations are expected to rise this month.
    The changes in supply terms were seen as likely to lead to cancellations of April cargoes by buyers across the world as they were not expecting to bear transport costs in full.
    Iraq, OPEC’s second biggest producer, also informed customers it was unable to compensate for the jump in freight costs.

  15. Yellow Jack says:

    A fleet of supertankers carrying Saudi oil will add to the growing congestion at U.S. ports in coming weeks at the same time producers are shutting in output as they run out of space to store unwanted supplies.
    A total of 43 million barrels of Saudi oil is set to arrive on the U.S. Gulf and West coasts by May 24, according to Rystad Energy. The flotilla — comprising 28 tankers, including 14 very large crude carriers, or VLCCs — will join a queue of 76 tankers waiting to unload in U.S. ports as the greatest oil glut in history plays out.
    Dozens of tankers are lined up off the two coasts with demand for motor and jet fuel destroyed by the Covid-19 pandemic. There are 34 tankers already waiting in line to offload about 25 million barrels on the West Coast, and 31 tankers lined up off the U.S. Gulf Coast. https://gcaptain.com/saudi-oil-flotilla-faces-congested-u-s-ports/

  16. Ok then... says:

    “U.S. Pulling Patriot Missile Batteries Out of Saudi Arabia Amid Oil Dispute : Move scales back American presence in Saudi Arabia just months after the Pentagon began a military buildup there to counter threats from Iran” https://www.haaretz.com/middle-east-news/u-s-pulling-patriot-missile-batteries-out-of-saudi-arabia-amid-oil-dispute-1.8831089
    Two squadrons of US fighter jets have already left the region, and US officials are said to be considering a reduction in the US Navy presence in the Gulf. The reductions are said to be based on assessments by some officials that Tehran no longer poses an immediate threat to US strategic interests. https://www.aljazeera.com/news/2020/05/remove-patriots-military-assets-saudi-arabia-200507183258484.html

  17. Update says:

    “The bill comes due for Saudi Arabia’s oil price war : First came coronavirus, then the price war; now painful government austerity measures that could prove unpopular.” https://www.aljazeera.com/ajimpact/bill-due-saudi-arabia-oil-price-war-200511213610964.html
    “Saudi Arabia’s latest oil production cuts show it is back in ‘whatever it takes’ mode, strategist says” https://www.cnbc.com/2020/05/12/saudi-arabia-is-back-in-whatever-it-takes-mode-for-oil-strategist.html

  18. So it goes says:

    With Storage Space Evaporating, the Oil and Gas Industry Will Get to Put Its Products Back Underground : The Railroad Commission has rolled back rules that once prohibited producers from storing liquid hydrocarbons in geological formations across the state, despite risks to aquifers. …Commissioners also voted against capping oil production, which may have slowed the stream of Texas oil enough to let storage capacity stabilize. Experts say doing so would have made the potentially dangerous underground storage unnecessary. (Texas Observer 5/21/20) https://www.texasobserver.org/underground-storage-oil-rule-rollback/

    The oil industry only has two choices as it reshapes itself after the oil price crash — either become broader energy firms or pursue a narrower specialization in oil and gas, Energy Voice reported, citing a new report from PwC. https://oilprice.com/Energy/Energy-General/Oil-Majors-Face-Another-Impossible-Decision.html

  19. Puppeteer says:

    “Oil prices are collapsing after Saudi Arabia sends ominous signal” https://www.cnn.com/2020/09/08/investing/oil-prices-drop-saudi-arabia/index.html
    “Saudi Arabia Just Crushed US Crude Oil Prices Again” https://www.fool.com/investing/2020/09/08/saudi-arabia-just-crushed-us-crude-oil-prices-agai/
    “Oil Extends Drop After Saudi Price Cuts Show Demand Concern” https://www.bloomberg.com/news/articles/2020-09-06/oil-extends-retreat-below-40-as-saudi-arabia-slashes-prices

  20. Palsy-walsy says:

    “Once an American foe, now a friend: OPEC turns 60” https://in.reuters.com/article/us-oil-opec-insight/once-an-american-foe-now-a-friend-opec-turns-60-idUSKBN26406P
    “Trump orders from Saudi Arabia what he needs for the oil price – and he is served,” Chakib Khelil, who was Algeria’s oil minister for a decade and OPEC’s president in 2001 and 2008, told Reuters. “So indeed OPEC has changed.”
    The Saudi Energy Ministry declined to comment.
    See also https://www.reuters.com/article/us-global-oil-trump-saudi-specialreport/special-report-trump-told-saudi-cut-oil-supply-or-lose-u-s-military-support-sources-idUSKBN22C1V4

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