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Saudi Oil Shipments to US Rise

Source: Reuters 3/16/2012, Location: Middle East

Saudi Arabia is preparing to extend this year's unexpected jump in oil sales to the United States, adding to speculation about the response of the world's top oil exporter to sanctions against Iran and a rally in prices.

The kingdom's shipments to the United States have quietly risen 25 percent to the highest level since mid-2008, according to preliminary U.S. government data, a sizeable leap that appears at least partly related to the imminent completion of a major expansion at its joint-venture Motiva refinery in Texas.

But some say the scale of the increase, plus other U.S. data showing Gulf Coast inventories are still subdued, suggest the potential for a political dimension as well, evoking comparisons to 2008 when the OPEC kingpin was driving up production to knock oil prices off record highs near $150 a barrel.

The surge appears set to continue. Vela, Saudi Arabia's state oil tanker company, has booked at least nine very large crude carriers capable of carrying 2 million barrels of crude each from the Middle East Gulf to the U.S. Gulf since the start of March, the biggest such wave of fixtures in years, analysts say.

The pivot to the U.S. market, which bore the brunt of Saudi output curbs after 2008, is a surprise for two reasons. For one, many analysts had believed that the kingdom's modest output increase in recent months was bound for fast-growing Asian markets, particularly given the pressure on refiners there to reduce their imports from Iran.

Plus, it comes after a year in which U.S. crude oil imports shrank to their lowest since 1999 thanks to a dramatic boom in shale oil production and tepid demand from consumers who are making every effort to cut back as gasoline prices rise.

The White House has been scrambling for options to bring down gasoline prices -- at a seasonal record high -- during an election year, after concerns over an Iranian supply disruption launched benchmark Brent crude to lofty peaks over $120 a barrel not seen since the record price run of 2008.

Washington has urged ally Saudi Arabia to cover potential shortages when new U.S. and European Union sanctions are expected to reduce Iranian oil exports from July. The Obama administration has considered releasing strategic oil inventories, potentially as part of a bilateral deal with Britain.

The kingdom has stepped up efforts this week to assure edgy markets that it will make up for any oil supply disruptions at a time when Iran's standoff with the West has begun to intensify.

"Beyond the expansion at Motiva, there has been a major public shift by the Saudis since the Iran tensions started to raise the price of oil," said Amy Jaffe, an energy policy expert at Rice University's Baker Institute in Houston.

"Saudi Arabia and the United States are trying to show the Iranians they (the Iranians) will have little flexibility, and they shouldn't count on the world needing all the oil that Iran produces."

Saudi output in February was up 450,000 barrels per day (bpd) from October at its highest since August.

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