First Middle East shipment of US shale oil bought by United Arab Emirates

The Seoul Spirit, a crude tanker filled with US shale oil sailed from Houston and arrived in the Persian Gulf in January.  Teekay.com photo.

Energy economist Ed Hirs says political conflict between UAE and Saudi Arabia the cause of unusual purchase

In January, a tanker filled with US shale oil arrived in the United Arab Emirates.  The trade between the US and OPEC’s fourth-largest producer illustrates the impact of the American shale industry on energy markets worldwide.

According to Bloomberg, the cargo of American condensate, a type of very light crude oil, was bought in December.  The US crude is more suitable for the UAE’s processing plants, according to a source.

Andy Lipow, president of Lipow Oil Associates told Bloomberg the purchases of US crude will likely remain uncommon. “As a member of OPEC and a large crude producer, I would imagine they would be very self-sufficient in their own crude supply,” said Lipow.

The Obama government ended the ban on US crude exports in 2015.  The move, along with significant expansion of US shale production has boosted US crude exports from 100,000 barrels of oil per day in 2013 to 1.53 million b/d in November.

In December, the US exported approximately 700,000 barrels of light domestic crude to the UAE, according to Census Bureau data.

The UAE normally imports extra-light condensate to process in a splitter and has relied on nearby Qatar for its supply of condensate.  However, the UAE and Qatar are mired in a political dispute and the UAE banned all petroleum ships from Qatar last June.

The United Arab Emirates is participating in the OPEC supply cut agreement and has cut its production to 2.85 million b/d from 3.07 million b/d at the end of 2016.

The export of condensate, very light crude oil, from the US to UAE is not noteworthy, says Ed Hirs, University of Houston economist Ed Hirs.

“UAE deliberately elected to stop purchasing from its usual supplier Qatar due to political differences.  Many Arab nations have tried to isolate Qatar, and it is obvious that there is a cost to this tactic,” he said in an email.

“The cost for UAE is that have to pay more for condensate and buy from the US.  The US export of condensate is really nothing of interest to the world oil market because what Qatar does continue to export will find its way into the market and possibly into the US market to offset the exported cargo.  It is important to remember that the US remains a net importing oil market.”

The United States imported 7.9 million b/d in 2016, according to the US Energy Information Administration, 41 per cent of it from Canada and 28 per cent from Saudi Arabia.