March 16 (Bloomberg) -- Saudi Arabia, the world’s biggest oil exporter, is booking the most tankers in years to supply the U.S., a sign the kingdom is fulfilling a pledge to compensate for a decline in Iranian sales, according to Dahlman Rose & Co.
Vela, the shipping unit of state-owned Saudi Aramco, booked nine so-called very large crude carriers in the past week to go to the U.S., Omar Nokta, a New York-based analyst, said in a report today. A further two vessels, each capable of carrying about 2 million barrels, were chartered earlier in March and all 11 are scheduled to load in the last week of this month or first week of April, Nokta said. Vela booked an average of one VLCC to the U.S. every other month last year, he said.
Iran, the second-biggest member of the Organization of Petroleum Exporting Countries, exported almost 2 million barrels a day last month, compared with 2.6 million in November, the International Energy Agency said in a report March 14. The country is facing tougher sanctions from the European Union and U.S., who say its nuclear program is aimed at making atomic weapons. Iran says it is for civilian purposes.
“It appears that Saudi Arabia is following up on its pledge to supply the global markets with increased crude oil ahead of the planned European embargo of Iranian supplies,” Nokta wrote in today’s report.
The U.S., the world’s biggest oil consumer, imported an average of 1.5 million barrels a day from Saudi Arabia this year, according to preliminary weekly data from the Energy Department. Cargo volumes are on track for the highest quarterly average since September 2008, the data show.
The jump in tanker bookings is helping drive vessel costs higher, with daily rates on the benchmark Saudi-Arabia-to-Japan route advancing 2.5 percent to $33,205 today, Baltic Exchange data show. Rates almost tripled since March 5, according to the London-based bourse, which publishes costs along more than 50 maritime routes.
“Rates can clearly go higher in the short-term as tight vessel supply tends to create a bit of panic among charterers,” said Petter Narvestad, an analyst at Fondsfinans AS in Oslo.
China Petroleum & Chemical Corp., also known as Sinopec, booked 10 VLCCs to load cargoes in the Persian Gulf yesterday, adding to four others taken earlier in the week, Nokta said.
The contact phone number posted on Vela’s website wasn’t working today. A person answering the switchboard at Saudi Aramco’s headquarters in Dahran, Saudi Arabia, said no one would be available to comment until tomorrow. Today is a public holiday in Saudi Arabia.
Iran’s oil exports will probably drop by 50 percent when EU sanctions take full effect in July, David Fyfe, head of the IEA’s market and industry division, said in an interview March 14. Iranian Oil Minister Rostam Qasemi, in an interview in Kuwait the same day, rejected that estimate and said the country was exporting in line with the quotas set by OPEC.
Motiva Enterprises LLC, a joint venture between Royal Dutch Shell Plc and Saudi Arabian Oil Co. that operates three refineries on the U.S. Gulf Coast, has supply agreements with the two producers that terminate in 2018, according to a company filing. New supply agreements for the venture’s Port Arthur refinery, which will double its capacity this year to 600,000 barrels a day, will commence when the upgrade is operational and last 20 years.
“Considering we buy zero Iranian crude, I would suspect some of the increase goes to the expansion,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Several units of the expansion project have been completed and turned over to operations, Emily Oberton, a spokeswoman for Shell, said in a March 12 e-mail. “Work on the remaining units is continuing as scheduled and full operations will begin in 2012.” She declined to say the status of individual units.