Oil world turned upside down as America sells oil in Middle East

By Sheela Tobben and Wael Mahdi on 2/7/2018

NEW YORK and KUWAIT (Bloomberg) -- The United Arab Emirates, a model Persian Gulf petro-state where endless billions from crude exports feed a giant sovereign wealth fund, isn’t the most obvious customer for Texan oil.

Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the UAE bought oil directly from the U.S. in December, according to data from the federal government. A tanker sailed from Houston and arrived in the Persian Gulf last month.

The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the UAE’s processing plants, a person with knowledge of the matter said, asking not to be identified discussing a commercially sensitive matter.

“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 Andy Lipow, president of Lipow Oil Associates. The purchases of U.S. oil aren’t likely to continue, given the UAE’s own supply, Lipow said.

The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 bopd in 2013 to 1.53 MMbopd in November, traveling as far as China and the UK.

U.S. Exports

The U.S. exported about 700,000 bbl of light domestic crude in December to the UAE, the Census Bureau reported Tuesday. It’s the fourth-largest OPEC producer’s first cargo of U.S. oil, according to EIA data. Although it exports more than 2 MMbopd, the Middle Eastern country typically imports extra-light condensate to process in a unit known as a splitter.

UAE crude production was 2.85 MMbpd in January, according to data compiled by Bloomberg. Output has declined from 3.07 million at the end of 2016 as OPEC and allies cut production to reduce a global glut and prop up prices.

The cargo was shipped from Enterprise Products Partners LP’s Houston terminal on the tanker Seoul Spirit, which arrived Jan. 31 at the Port of Ruwais in Abu Dhabi, according to ship tracking data compiled by Bloomberg.

Until last year, the UAE relied on Qatar for its condensate supply. But the two countries are embroiled in a political dispute, and the UAE decided in June to ban all petroleum ships from Qatar.

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