& Tobago


Very usefull links


News links




Dow Jones

Oil price



Views and News






U.S. shale's blows leave Middle East oil producers staggering

Daniel Acker/Bloomberg

Play video:
Oil Strategist Iaccino Sees 'Low $40s' Crude Short-Term

- U.S. light-oil flows to Asia erode OPEC members' market share

- Jump in U.S. fuel exports spurs decrease in refining margins

By Serene Cheong / Bloomberg

Petroleumworld 12 27 2018

The U.S. oil industry is delivering a one-two punch to Middle East producers already reeling from a collapse in prices.

A tussle is playing out in the market for so-called light oils, which have a lower sulfur content and are less dense than heavier varieties. When processed, these grades typically yield a higher amount of fuels like gasoline and naphtha. And now, American supplies are weighing on prices for such crudes as well as fuels made from them.

Light oil pumped in U.S. shale fields is increasingly making its way to Asia, undercutting sales by the likes of Saudi Arabia. Additionally, America is exporting a record amount of refined fuel, contributing to a global glut in gasoline and naphtha. That's hurting some of the biggest members of the Organization of Petroleum Exporting Countries as they prepare to curb crude output in a bid to stabilize the market.

Middle East producers -- still the dominant suppliers to Asia -- are being forced to tackle American crude competition by lowering their oil pricing to defend their market share. The refiners, meanwhile, are contending with booming U.S. fuel shipments dragging down their returns from making processed products.

“It is no surprise that Middle Eastern producers are having to cut light crude prices,” said Virendra Chauhan , an analyst at industry consultant Energy Aspects Ltd. Over the course of 2018, the key sources of global oil-output growth have included light crude from U.S. shale fields and Saudi Arabia, he said.

While Middle East producers such as Saudi Arabia and Abu Dhabi are reducing the pricing for their lighter crudes, American exports to Asian nations such as India and South Korea are surging. Even a temporary halt by China due to its trade war with the U.S. hasn't significantly dented overall flows this year.

While the rivalry between Middle Eastern producers and sellers of U.S. oil has intensified since 2016, with even relatively heavier American crudes such as Mars and Poseidon coming to Asia, the competition is particularly stiff for lighter grades. Abu Dhabi's Murban and Saudi Arabia's Extra Light have similar fuel yields and chemical characteristics as shale crude.

State-owned Abu Dhabi National Oil Co. cut the premium for 2019 term supplies of Murban crude to 16-18 cents a barrel over its monthly official selling prices, down from about 25 cents in 2018. Government-run Saudi Aramco slashed the premium of its Arab Extra Light grade over Middle Eastern benchmarks to the lowest level in 16 months. They are not only competing with shale flows, but also with new regional varieties such as Umm Lulu and Kuwait Super Light .

Despite the recent price reductions, Middle Eastern light crudes remain relatively handicapped versus American oil ahead of 2020, when new international rules mandating the use of less-polluting fuel in ships take effect. The sulfur content in grades such as Arab Extra Light and Murban is still higher than levels in U.S. crude, meaning they need to be processed a bit more to yield cleaner fuels.

Shrinking Profits

On the refined products front, rising shale production and its use in U.S. refineries are leading to a domestic surplus of fuel that either gets exported to international markets, or displaces cargoes that move from Asia to buyers elsewhere such as Latin America.

Average U.S. exports of oil products have risen 7 percent so far this year, data from the Department of Energy show. America's surplus of gasoline is estimated to swell by 80,000 barrels a day in 2019 as demand plateaus and domestic output climbs, according to ESAI Energy LLC, pushing daily exports of finished and blending material to over 1 million barrels next year.

“Excess U.S. gasoline volumes will face stiff competition in an oversupplied global market,” Ian Page, an analyst at industry consultant ESAI Energy, wrote in a Dec. 19 note. These barrels are expected to find their way to Latin America and other markets, displacing the imports from Europe and Asia, he said.

Refining margins in Singapore, Asia's trading hub, fell to the lowest level in over 4 years earlier this month, according to data from Oil Analytics, due to factors including a rise in oil-product supplies in the Atlantic Basin as well as higher exports from China and South Korea. Returns from making fuels were at 77 cents a barrel as of last week, compared with an average of $2.71 over the past year.

Average monthly flows of U.S. light distillates such as naphtha and gasoline components to Asia were at about 552,000 metric tons this year, almost triple the volume over the last two years, according to data compiled by Bloomberg.

“Oil-product markets have felt the ill effects of more light crude supplies for some time, with gasoline margins under-performing,” said Energy Aspects' Chauhan. “That's limiting the ability of refiners to process incrementally lighter barrels.”


Original article



We invite you to join us as a sponsor. Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.


Story by Serene Cheong from Bloomberg.

bloomberg.com 12 26 2018


We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95, '98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Twitter: @petroleumworld1



Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.