A Reuters article from Oct. 18 shows exports of crude oil from
Saudi Arabia fell from 7.6 million barrels per day to 7.3 million barrels per
day in the month of July.
The numbers come from information materials provided by Saudi
Arabia as a member of the Organization of Petroleum Exporting Countries (OPEC).
The report also shows that Saudi Arabia’s oil inventories
peaked one year ago, and that crude inventories have decreased since then.
Domestic refineries in the country processed 2.6 million barrels per day of
crude oil in the month of August, down about 10,000 barrels per day from July.
Of the remaining capacity, national oil firm Saudi
Aramco has stakes in over 5 million barrels per day, and has pledged to invest
billions more dollars in traditional oil and gas energy systems, calling the
next few years a “transitional period” where oil and gas production will occur
in tandem with renewables and sustainable systems exploration, within Saudi and
globally.
On Sept. 28, OPEC made a plan to reduce output to 32.5
million barrels per day, cutting output for the first time since 2008.
With lower oil prices causing headaches for GCC economies,
what is the context of Saudi Arabia’s announcement?
“August’s lower output comes at a time when Saudi, along
with other OPEC nations, has agreed to cut production, putting an end to the
market share war going on since 2014,” Priya Tuteja, senior manager of investment research and analytics at Aranca, told Gulf News Journal.
“The gamble to kill off (the) U.S. shale industry with sustained oil production
amid slowing demand left several dents to the OPEC economies, particularly
Saudi, as it is the largest producer in the cartel with about one third of the
total OPEC output.”
Tuteja said the OPEC agreement to cut oil production will
translate to about a 0.7 percent decrease in the global oil production, without really
impacting a supply glut that has driven down low prices in the past.
“Despite its potential limited impact, the news buoyed oil
prices due to positive sentiments, which works in the kingdom’s favor,” Tuteja
said.
Tuteja also pointed out those seasonal demand levels baked
into the global energy calendar.
“The output cut also comes at a time of the year when the
global oil demand is seasonally weak, due to winter months in the U.S. and
refinery maintenance season in Asia,” Tuteja said. “Saudi has cut production
seasonally (July to January) by 320,000 bpd every year since 2005 due to lower
demand. The agreement is perfectly timed, and gives it flexibility to deal with
slowing demand and help stabilize oil prices sentimentally, if not
fundamentally.”
Analysts around the world will continue to look at how oil
fluctuations impact Gulf Coast countries, and how they correlate with ambitious
national goals in countries like Saudi and the UAE to discover new sustainable
energy possibilities.
