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June loading crude programmes will be the first month to trade after refinery maintenance season ends in May. Even with diminished risk of reduced US waivers for Iranian buyers as the US administration grapples with the fallout from political tension with Venezuela, collapsing Venezuelan production and substantially restricted Middle Eastern crude oil availabilities will keep worldwide supplies tight into the summer. Light sweet barrels are also affected by supply constraints. When combined with maintenance in CPC, Ekofisk and other North Sea fields, sweet-sour spreads have started to widen in the near term, especially with fuel oil under pressure and gasoline performing strongly amid a plethora of FCC outages.
Sour markets are already responding with strong Oman differentials in the East and high Urals differentials in the West as Indian refiners hunt for substitutes for lost Venezuelan supplies. Far Eastern Russian grade ESPO’s differentials are recovering as Chinese buying returned. Australian very light barrels are supported by firmer regional demand. Medium-sweet Brazilian grades like Lula are seeing solid demand and stronger differentials for delivery to teapot refineries in China.
May loadings should be broadly unchanged, with high Saudi OSPs limiting the attractiveness of the Kingdom’s grades, except if buyers are at loss for alternatives. Venezuelan exports will remain uncertain while US exports should drop because of domestic needs and loading issues at Al Shaheen will delay exports. However, higher exports are expected out of Nigeria and Iraq, with weather disruptions easing in the latter. For Iran, uncertainties around the prolongation of US waivers will keep some buyers away, but to a lesser extent than in October 2018. May trading was done at strong differentials, with Angolan cargoes flying off the shelves and Middle Eastern deals done above OSP. Helped by the wider Brent-Dubai spread, ESPO traded at higher differentials, while Australian heavy barrels were sold at record-high differentials. May OSPs were also set higher by Saudi Arabia and Iraq.
March total seaborne loadings were down by 1.48 mb/d m/m and by 0.49 mb/d y/y to 44.86 mb/d as OPEC Middle Eastern producers continued to curtail exports. Saudi loadings were down by 0.12 mb/d m/m to 7.03 mb/d, and Iraqi exports were cut by 0.18 mb/d m/m to 3.81 mb/d because of bad weather at the Basrah terminal. Venezuelan exports dropped by 0.47 mb/d to 0.77 mb/d as power outages curbed production, while Iranian buyers increased their intake during the last trading window before US waivers expire on 4 May. In non-OPEC producing countries, higher Norwegian and Russian loadings offset lower Brazilian and Mexican exports, while US tidewater exports advanced to 2.5 mb/d. Worldwide refinery maintenance, including 8 mb/d in March, 7.47 mb/d in April and 4.39 mb/d in May, capped demand.
April worldwide volumes should be lower than March volumes as Japan and South Korea avoid Iranian barrels that would land beyond the end of the waivers. Venezuelan loadings will drop further as power outages continue to plague production facilities and buyers consider the threat of secondary sanctions by the US administration. Libya faced an escalation in its civil war in early April that might reduce exports. April trading has been more subdued with an end-cycle overhang in West Africa, mostly due to weaker Asian buying because of heavy refinery maintenance in April and May.