Crude Oil Trade to 2025: Russia Stuck with Europe

ESAI Energy has forecast global crude oil trade flows by country and region to 2025 in their Five-Year Crude Oil Outlook. “There are no surprises here, but the volumes are pretty striking,” said Sarah Emerson, President of ESAI Energy. “China accounts for more than 1/3 of interregional trade in crude oil. The flow of crude to Asia dwarfs all other trade over the next five years.”

As shown in the following chart, the two crude trade routes that grow the most by 2025 are the Middle East to Asia and the US to Asia. Canada, Latin America and the FSU also grow their crude sales to Asia. African sales to Asia actually decline during this period, but that is, in part, due to the completion of the Dangote refinery.

Surprisingly, the FSU’s sales to Europe rise by more than their sales to Asia as Russia is increasingly boxed out of Asia due to higher Arab Gulf production and downstream investments. “Europe is not a growth market, so Russia may find collaboration with OPEC increasingly unsatisfying,” pointed out Sarah Emerson.

Oil climbs, notches fourth monthly gain on growing demand

Oil prices edged higher on Friday, with global benchmark Brent posting a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in Covid-19 infections across the world.

Brent crude futures for September, which expired on Friday, rose 28 cents, or 0.4%, to settle at US$76.33 a barrel. The more active contract for October ended the session up 31 cents at US$75.41 per barrel.

US West Texas Intermediate (WTI) crude futures rose 33 cents, or 0.5%, to end the session at US$73.95 a barrel.

Both benchmarks notched gains of more than 2% for the week, while Brent rose 1.6% in July, its fourth straight monthly increase. WTI was unchanged for the month.

Even with coronavirus cases rising in the United States, all around Asia and parts of Europe, analysts said higher vaccination rates would limit the need for the harsh lockdowns that gutted demand during the peak of the pandemic last year.

“The oil complex has apparently taken a second look at the coronavirus factor in determining that demand will see only a modest reduction, at least one that will prove minuscule in relation to last year’s plunge in consumption,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Analysts pointed to a rapid rebound in India’s gasoline consumption and industrial production following its Covid-19 surge as a sign that economies are more resilient.

Russian Deputy Prime Minister Alexander Novak said oil consumption was increasing across the globe.

“Demand is on the rise, consumption is on the rise. Of course, the coronavirus is still there but … there are no such lockdowns as there were before,” he told reporters.

US oil giants Exxon Mobil and Chevron reported earnings, and their guidance indicated the market should remain tight, analysts said.

Chevron said it expects to add at least one or two rigs in the Permian basin in the third or fourth quarter and said it was seeing demand for most products, other than international jet fuel, starting to return to pre-pandemic levels.

The number of US oil rigs has risen for 11 straight months, but fell two to 385 this week, data from energy services firm Baker Hughes showed.

“Big oil is not ramping up spending in new wells and focusing on debt reduction, which should keep OPEC+ happy with their steady plan of increasing output,” Edward Moya, senior market analyst for the Americas at OANDA said.

“OPEC+ is not losing market share to the US, which should mean the oil market is still poised to go much higher.”

A Reuters survey found OPEC oil output rose in July to its highest since April 2020, as the group further eased production curbs.

US crude production rose just 80,000 barrels per day in May to 11.23 million bpd, according to a monthly government report.

Still, oil prices will trade near US$70 per barrel for the rest of the year supported by the global economic recovery and a slower-than-expected return of Iranian supplies, with further gains limited by new coronavirus variants, a Reuters poll showed.

Top oil exporter Saudi Arabia is expected to raise crude prices for sales to Asia in September for a second straight month, tracking strength in Middle East benchmarks, trade sources said.
Source: Reuters