Saudi Arabia Turns Off US Crude Oil Tap

Saudi Arabia seems to be finally doing what it takes to reduce the world's most visible oil glut: the one in the US. But, its renewed vigor comes as OPEC's deal to reduce excess crude stockpiles starts to show signs of unraveling.

Data published last week by the US Energy Information Administration show that imports from Saudi Arabia in the week to July 14 fell to their lowest for seven years: just 524,000 barrels a day, Bloomberg reported.

For sure, one week's number does not mean much on its own, particularly when a single very large crude tanker could raise or lower that figure by half. But this is not an isolated figure. The EIA data show a clear drop in deliveries from Saudi Arabia since the start of June.

The average rate of US imports from the desert kingdom over the past six weeks has dropped by 450,000 barrels a day, or 34%, compared with the first six weeks of the year.

Given that it averages six weeks for a tanker full of crude to travel from the Persian Gulf to the US, this drop in imports reflects a slowdown in Saudi shipments that began in mid-April, which shows up in Bloomberg tanker tracking data for the kingdom.

So Saudi Arabia is finally slashing exports to the US, even as shipments to other destinations—with less visible inventories—have been maintained, or even risen.

This is crucial, because the failure to drain US storage tanks has been a major factor in driving down oil prices.