RIYADH: During January – a month when all eyes were on oil production cuts – exports leaving the Middle East Gulf (MEG) region hit the highest level in at least two years, according to Genscape. At the end of November 2016, the Organization of the Petroleum Exporting Countries (OPEC) addressed the perceived global oversupply of oil and consequent low prices. OPEC members agreed that all countries, except Iran, would cut total production by 1.2 million barrels per day (bpd), starting on January 1. In addition, 10 days later, a group of 11 non-OPEC oil-producers, led by Russia, arrived at an agreement to ease their production in 2017 by another 558,000 bpd. The effects of the OPEC-non-OPEC deal were immediate, and oil prices jumped quickly in response to the agreement, with the benchmark Brent price for January moving from $46.38/bbl to $50.47/bbl, or an 8.82 percent gain between November 20 and November 29, 2016. Recent surveys suggest that Saudi Arabia’s crude production fell by around 470,000 bpd in January to just under 10 million bpd, while Russia shaved its output by 10,000 bpd to 11.1 million bpd last month.
Genscape’s monitoring of exports leaving the MEG region revealed two developments in January, which at first glance seem contradictory but are believed by Genscape to be complementary. When measured by the date of departure from the region, MEG exports rose to the highest levels in the last 12 months. Genscape calls this the “Departure Month,” which is the month during which a vessel declared a destination and signaled its intent to leave the region. However, when measured by the date of each vessel’s arrival, the Berth Date, at a crude loading facility, output fell in January compared to December 2016. The difference between Berth Month and Departure Month is essentially the difference between what loads and what leaves (see chart). The distinction has been important because often vessels linger in the MEG for some days for operational reasons, or at times may linger for months. Any delay over seven days is typically considered to be floating storage.