As Saudi Arabia Limits US Oil Shipments, Iraq Steps in

Saudi Arabia’s efforts to reduce a worldwide crude supply glut by cutting shipments to the United States means others are now filling in, most notably Iraq, in a trend that is set to accelerate in the coming months.

Over the summer, normally one of the busiest periods for crude shipments, US imports of crude from Iraq rose by 41% from a year ago, while similar shipments from Saudi Arabia have dropped by 22%, Reuters reported.

That trend has continued, with ClipperData showing Iraqi shipments to the nation’s largest refinery in October surpassed Saudi Arabia’s for the first time in more than 30 years.

It shows how Saudi Arabia’s leading role in reducing world supply has also cost it market share in the world’s largest oil consumer, as its share of US imports has fallen to the lowest level since 1985. Imports have increased from OPEC members Iraq and Nigeria, along with Canada, and refiners are relying more on rising US shale production.

“For every barrel the Saudis do not produce, they are losing market share,” said Sandy Fielden, director of research, commodities and energy at Morningstar. “Refiners go to an alternate in that situation and obviously the Iraqis took advantage.”

Saudi Arabia cut shipments to the United States beginning in June, as part of the ongoing effort by the Organization of Petroleum Exporting Countries to cut supply.

OPEC, along with non-member nations including Russia, agreed in late 2016 to cut world output by 1.8 million barrels a day. Representatives of OPEC countries will meet at the end of the month to consider extending cuts.

Between June and August of this year, according to US Energy Information Administration data, Iraq exported an average of 600,000 barrels of oil daily to the United States, compared with 426,600 bpd a year ago.

Saudi Arabia’s shipments dropped to an average of 850,000 a day from 1.09 million bpd last year, according to US energy data. At its peak in 1991, Saudi Arabia supplied the United States with 29% of its crude.  According to Matt Smith, director of commodity research at ClipperData, shipments from Iraq to Motiva Enterprises LLC’s Port Arthur, Texas refinery are up by almost 35% in the six months through October.

The Texas refinery, the largest in the United States and owned by Saudi Aramco, did not respond to a request for comment.