Calypso Crude: Caribbean Exports Come To The Party

Whilst the Caribbean might be an enticing choice for a holiday destination, it is also an important crude export region. In 2014, the region, including countries in Central and South America with a coastline on the Caribbean Sea or Gulf of Mexico, is expected to export 3.6m bpd of crude oil, or 10% of seaborne crude export volumes. Even though growth in exports from the region has been limited since 2004, tonne-mile exports have more than doubled in the same period.
The Big Three

The major exporters of crude oil in the Caribbean region are Venezuela, Mexico and Colombia, who together are projected to export 3.3m bpd of crude oil in 2014. However, as the Graph of 

he Month shows, crude exports from the Caribbean have not risen during the last decade and are expected to decline 9% y-o-y in 2014.

There are several reasons for these weak export figures. In Mexico, production has been declining steadily over the past decade and is expected to fall 4% y-o-y in 2014, partly on the back of waning production from the Cantarell field. Meanwhile, a lack of investment has significantly depressed Venezuelan production, driving down exports to a projected 1.4m bpd in 2014, from 1.7m bpd in 2012.
A Jerk To The East

A significant proportion of Caribbean crude has historically found a home in the US, which accounted for over 90% of Caribbean crude exports in 2004. However, the US shale revolution has depressed the level of crude imports to the US; as a result US imports of Caribbean crude have declined by a CAGR of 4.3% between 2007 and 2013, and are expected to account for 2.0m bpd in 2014.

So, whilst the US has been taking less crude from the Caribbean, China and India have increased imports of Caribbean crude by a CAGR of 20.6% and 38.7% respectively between 2007 and 2014. This growth is projected to push Chinese and Indian imports of Caribbean crude to 0.5m bpd and 0.7m bpd respectively in 2014.
Hardly A Rum Deal

With a voyage distance of roughly 13,000 miles to China and 10,000 miles to India (compared to approximately 2,000 miles to the US), the growth in these shipments has boosted Caribbean crude tonne-mile exports significantly. Total crude tonne-mile exports from the Caribbean are forecast to hit 1109bn in 2014 (640bn more than in 2004), growing by a CAGR of 9.0% from 2004-14. This has been a useful boost to demand for VLCCs, which transport the majority of crude from the Caribbean to China and India. However, demand on traditional Panamax and Aframax trades to the US have been in decline. This has placed downward pressure on Aframax and Panamax demand in the region.

So, it’s not just the white sand beaches that attract tanker owners to the Caribbean. Although volumes are not projected to increase in the short-term, it is likely that China and India will continue to increase their share of crude exports from the region. As a result, this could support VLCC demand in the region and further growth of Caribbean crude tonne-mile exports.
Source: Clarksons