Voices rising in US to block Saudi crude shipments

Voices rising in US to block Saudi crude shipments
Voices rising in US to block Saudi crude shipments :File Photo

Voices are rising in United States to block Saudi crude oil shipments as US crude oil futures crashed on Monday with a glut.

US crude futures crashed on Monday with a glut of supply and lack of storage forcing pricing into the negative.

The slump in demand for crude oil triggered by the coronavirus pandemic has led some in the United States to call for shipments from Saudi Arabia to be blocked.

US Senator Ted Cruz told the Saudis to “turn the tankers the hell around” on Wednesday.

About 40 million barrels of Saudi oil are on their way to the United States and due to arrive in the coming weeks,piling more pressure on markets already struggling to absorb a glut of stocks, according to shipping data and sources.

Data shows 19 supertankers,each capable of carrying two million barrels of oil, were sailing to key US terminals, especially in the US Gulf.

Three separate tankers, also chartered by Saudi Arabia, were currently anchored outside US Gulf ports.

US crude futures crashed on Monday with the front-month May contract, which expired on Tuesday, settling at negative $37.63 a barrel.

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Amid the slump, traders have scrambled to get out of the contract to avoid taking delivery of barrels because of a lack of storage.

The imminent arrival of the cargo comes at a time when the main US storage hub in Cushing, Oklahoma, the delivery point for West Texas Intermediate (WTI) crude, a grade of crude oil used as a pricing benchmark in the country, is expected be full within weeks.

President Donald Trump said on Monday he would “look at” possibly stopping Saudi shipments to the US.

While last week Frank Fannon,the assistant secretary of state for energy resources, said tariffs were a possibility.

In a tweet on Wednesday, Cruz, who represents Texas, was more direct.
Shipping sources said that Saudi Arabia tried to halt deliveries by seeking storage options for the cargo from tanker owners when the ships were chartered last month,but many pushed back citing booming rates and not wanting to tie up vessels.

Two sources said Saudi Arabia was looking into whether it could re-route the tankers elsewhere if the US halts imports.

Meanwhile, Saudi Arabia’s state oil company, Saudi Aramco, has said it is committed to its long-term contracts with customers with deliveries of crude shipments for April, May and June.

Aramco also “offers its larger customers with refineries in multiple regions of the world optionally to take their crude purchases from Aramco into the region”, the company said in a statement.

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“Changes in ship destinations are routine in the course of our business, particularly in a company of our scale.”

Oil traders active in European and Asian markets said there was expectation the Saudis would look to divert the cargo to other markets if a US ban was imposed, which would then put huge pressure on storage tanks in those two regions.

“Europe looks full, but surely if the Saudis offer it at really cheap levels, buyers would take it,” a source with an international trading firm said. “Some still have storage spaces or may agree to float it for some time.”