US oil floods Spain in the face of a revolution in the flow of crude oil on the world market
The oil market is constantly evolving. The wars and geopolitical tensions of recent years are causing a marked transformation in the flow of crude oil around the world. Spain is not immune to these changes. Just seven years ago, it was impossible to find a barrel of American oil in Spain (we’ll explain why later), but today, if you go to a gas station to fill up, it’s more than likely that the fuel you bought came from a US refinery. If it is not from the USA, then it is very likely that it is from Brazil, Mexico, Canada… American crude oil is flooding Spain: its entry occurs mainly through the ports of Huelva, Algeciras and A Coruña, where important oil refineries are located. . From there it spreads throughout the country. Spain is moving away from eastern oil to use American crude oil.
Spanish refineries, driven by tensions in the Middle East, attacks in the Red Sea and sanctions against Russian oil, are accelerating their consumption of Asian oil (Saudi Arabia and Iraq) (the routes are more dangerous). Fortunately, oil production in America continues to increase, allowing crude oil from that continent to become the most used oil in Spain, although it must cross an entire ocean to reach Spanish ports. Trade of these products between Spain and America reaches a historical high. In addition, since Spain’s refining capacity exceeds domestic consumption of this product, refineries can export a small portion of the refined oil.
In the first months of 2024, Spain imported about 1.3 million barrels of crude oil every day. Of this amount, about 760 thousand barrels came directly from America: Brazil, the US and Mexico lead the way with 220,000 barrels per day each. (more or less, since the amount changes slightly each month) and Venezuela with about 65,000 barrels per day and Canada with 35,000 barrels per day round out the rest. The increase was more than noticeable, since in 2015 the volume of crude oil flowing into Spain from the Americas was less than half of that 760,000 barrels.
Among American countries, Brazil and the United States stand out for their growth. In the first case, crude oil supplies have increased fivefold since 2015-2016 due to rising Brazilian crude oil production, which is now well over 3 million barrels per day. In the case of the USA, this was not only key oil boom due to fracking, as well as the lifting of historical bans on oil exports that were in force in the leading world power until 2015 (which is why American oil was impossible to find in Spain). Since then, the US has been able to export its oil, and Spain has become one of its main customers.
The wave of Asian and Russian oil is receding
Against, Crude oil coming from the Middle East has decreased. In the first half of 2024, about 71,000 bpd came in. crude oil to Spain, with the only suppliers being Saudi Arabia and Iraq. In 2015, these countries sent almost 300,000 barrels per day to Spain. Something similar happened to Russia, whose crude oil supplies to Spain have been cut to zero since the invasion of Ukraine and the imposition of sanctions. In 2015-2016, Russia sent about 100 thousand barrels per day to Spain.
In addition to tensions and supply disruptions, the price is also affected by changes in the flow of crude oil entering Spain. While there is no concrete or supply-specific data available, it is intuitive that, for example, American oil sells for the same or even lower prices than Saudi Arabian oil. For example, last week it became known that South Korea is also reducing imports of Saudi crude oil and increase in cargo transportation in the USA for the second month in a row ahead of the best price for US crude oil. S&P Global Commodity Insights explains that refiners paid an average of $85.25 per barrel for crude shipments from Saudi Arabia, which is $1.55 per barrel more expensive than the average monthly charge of $83.7 per barrel in the United States. That is, some grades of American crude oil are today cheaper than Saudi oil.
Market sources directly involved in the purchase of American crude oil in Spain explain to elEconomista.es that among the factors determining the demand for crude oil, the price of the product is basicl, both simply in dollars per barrel, and taking into account the cost of products obtained after distillation and processing.
Different oils, different prices.
Each crude oil has a different quality, which results in a range of refined products of greater or lesser value. Generally, The most expensive crude oil is usually the one that produces higher value products (lighter and lower in sulfur). and the cheapest ones are heavy with a lot of sulfur. However, this may change depending on the regional market that the buyer/processor plans to target these products. US crude oil, and WTI in particular, is typically an expensive crude oil because it is light and low in sulfur.
However, American producers are taking advantage of the fact that tensions in the Middle East and sanctions against Russia are making it difficult and expensive to ship that crude oil to Europe to sell their products. The same sources explain that “as a result of European Union sanctions against Russia caused by the invasion of Ukraine, Europe replaced crude oil from Russia that was diverted to Asia (mainly China and India) with crude oil from other countries.” “origins among which the United States stands out.” It should be noted that West Texas Intermediate and Brent oil grades The two most important benchmarks for the West are just two types of crude oil in a long list of oils.
The movements are interesting. The US produces a lot of oil, so much so that it is the largest producer in the world. Despite this, the country does not produce enough oil to cover its own needs. So, Why are you exporting so much oil to Spain? The answer lies in Canada, a country that pumps far more oil than it consumes. Excess Canadian crude oil (which sells at a discount to US grades) goes directly by sea or pipeline to the US, while slightly more expensive US crude oil is sent to Spain (and other European countries). .) This is a good example of how refineries compete for the most suitable (composition) and favorable (price) crude oil, with little regard for where it is produced.
The importance of African oil
Another major supplier of oil to Spain is Africa. While it may be interesting, this volatile region has, by contrast, been Spain’s most stable oil supplier over the past decade. Since 2015, the African continent has sold around 460,000 barrels of crude oil to Spain every day. African countries include Nigeria (Africa’s largest crude oil producer), Libya, Angola and Algeria. While supplies from Africa to Spain remain stable in aggregate terms, there is no clear winner within the continent. In recent months it has been Nigeria is the country that exported the most oil to Spain.However, in other years, the “rule” was also shared with Libya and even Angola. The former Portuguese colony generally goes unnoticed in the media, despite producing more than a million barrels of crude oil daily.
Lately it’s been nigerian oil the one that was introduced in Spain. The African country is trying to reclaim its throne on the continent through various measures aimed at promoting the production of crude oil and refined petroleum products. Nigeria’s oil pumping gradually recovered by 2024, reaching 1.4 million barrels per day. To this should be added the launch of a large oil refinery in Dangote, which will allow the country to gradually meet domestic demand for petroleum products and begin exporting.
Spanish refineries are operating at full capacity
However, Spain’s refineries produced the most refined products in five years in February, helping boost production of diesel and jet fuel, where margins were highest, official Cores data reproduced by Quantum Commodities Intelligence showed. Total production was 16% higher than the previous year., with 1.39 million barrels every day. The increase coincides with the end of scheduled work on some key units at Spain’s largest refinery, the 220,000 b/d Bilbao refinery, which carried out maintenance on both the vacuum distillation unit (VDU) and coker unit in January.
Spain’s refinery output was abnormally high, including a five-year high, producing 244,000 barrels of jet fuel per day (up a quarter from February 2023 and about 10% more than 2019). On the other side, Diesel/diesel fuel production grew 4% year-on-year up to 550,000 barrels per day, where margins are more pronounced. All of this helped push net diesel exports to an 18-month high of 57,000 barrels per day. On the other hand, gasoline production fell 3% to 205,000 barrels per day, gasoline production rose 13% year-on-year to 46,000, and heating oil production rose 60% year-on-year to 72,000 barrels per day.
Thus, Spain has become a unique example of the reconfiguration of global oil flows. US crude oil plays a vital role in supplying Spain today., while Asian varieties lose weight. In turn, sanctions against Russia allow Spain to also export more refined petroleum products such as diesel fuel and kerosene.