Saudi Arabian Oil Production to Decline with OPEC+ Agreement
Amid the global crisis, Saudi Arabia is leading a push among major oil producers to cut production. As a part of an OPEC+ agreement to boost price, the Saudi Arabian Oil Company, Saudi Aramco agreed to cap output at 8.5 million barrels a day from May-July. It was later notified that starting this month, the kingdom would pump only one million barrels per day – much less than June’s production.
A report shows that the Saudi crude exports fell to 5.7 million barrels a day through June 29, which is the lowest since the flow of tracking began in the initial months of 2017. For the month of May, the export was 6.2 million a day. The experts have compared the reduction with more than seven full super tankers.
It appears that the oil exports to the world’s biggest economies, China, the US etc. have especially been curbed. Flows of Saudi Arabian oil to China, which is usually the largest purchaser, were down by 45 percent on a monthly basis in June. Similarly, the oil flow in the US, which was almost 1.3 million in April shrivelled to 224,000 barrels a day in June. Only three super tankers and a smaller vessel were sent to the US in June.
Around 17 million barrels of Saudi Arabian oil have been hauled in tankers from the kingdom with no news of where it will be sent next. The analysts believe that if the vessel is to be sent to the US, it would arrive only in the first half of August.
Over the time, Saudi Arabian oil exports have also been impacted by the effects of oil price war with Russia. In the months of April and May, Aramco cut its official selling prices for oil and later raised it for July, with limited output decision. A report stated that when the prices were low in April, Saudi Arabian oil exports to India increased to more than a million barrels a day.
A similar increment in shipments is expected for this month, although Saudi Arabian oil inflows would not be as the one analysed in mid-June. Meanwhile, exports to South Korea are expected to climb to 1.1 million barrels a day, and the shipments to Japan would decline to 610,000 barrels a day.
By taking initiatives of cutting cost and production, Saudi Arabia wishes to dominate the oil and gas sectors throughout the world. The Energy Minister of Saudi Arabia, Prince Abdulaziz is hopeful that if the same continues, the Kingdom will remain the world’s biggest hydrocarbon even in 2050.
Speaking about the oil market outlook in 2050, Abdulaziz said Saudi Arabia will fulfil the mission in “the most environmentally sound and safe way and the most sustainable way”. The bigger question in picture is how? Even though Saudi Arabian oil production in 2019 was an average of 11.81 million bpd, does that mean Saudi can be considered world’s largest hydrocarbon producer?
No doubt, Saudi holds a major part of world’s market but Russia is right there too, producing an average of 11.49 million bpd. While Saudi consists of 12 percent of the world’s total, Russia constitutes 11 percent of the world’s total in production.
Both Russia and Saudi Arabia when combined together can stabilise the world’s oil supply, creating an unmatched oil production powerhouse. But when indulged in oil price wars, they could create a havoc, bringing down supply chains, price crashes, altogether leading to oil crisis. Following the OPEC+ agreement, which calls for a reduction in Saudi Arabian oil production, would be one wise decision to stay away from unwanted fights in the oil market.
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