OPEC crude shipments stay high, despite output cuts: BofAML

The Organization of Petroleum Exporting Countries’ (OPEC) crude oil shipments remain high, despite the group’s move to reduce production late last year, Bank of America Merrill Lynch (BofAML) said in a report on Sunday.

“Over the period Q3 2016 to Q1 2017, we observe that combined production in Saudi, Iran, Iraq, Kuwait and Qatar decreased by 820,000 barrels per day (bpd), sequentially. However, total exports actually increased by 250,000 bpd over the timeframe,” analysts from the bank’s global commodity research team said in the report.

While the decrease in production and exports between Q1 2016 and Q1 2017 was more aligned, the share of Arabian Gulf exports to production from these countries held at around 75 percent – suggesting that too much crude oil is being exported from key OPEC members, the bank said.

The United States, meanwhile, is importing crude from the Middle East at the fastest rate since 2013, it added.

According to BofAML, total oil inventories in the US remain high, weighing on the oil market and are preventing a price recovery.

“Even if inventories drop in the next six months and the physical oil market tightens, market concerns may shift to paper flows,” the report said.

The bank estimates that producers may hedge up to 1.3 billion barrels in second half of 2017 for 2018, overwhelming consumers and capping forward prices.