After having instructed Aramco to boost production to unseen levels, Saudi Arabia now plans to boost oil exports in May to a record 10 million barrels per day, causing oil prices to fall once again. In the last couple of days, Aramco has offered their Arab Light and Arab Heavy blends for between $25 and $28 dollar per barrel in Europe
In order to achieve this level of exports, the Kingdom is trying to reduce its domestic consumption, which it expects to replace with natural gas from the Fadhili gas plant.
Saudi Arabia’s Energy Ministry issued a statement on Tuesday claiming that “Saudi Arabia will utilize the gas produced from the Fadhili gas plant to compensate for around 250,000 barrels a day of domestic oil consumption, which will enable the Kingdom to increase its crude exports during the coming few months to exceed 10 million barrels a day,”.
Saudi Arabia may struggle to free up more crude oil for exports in the next couple of months as power consumption is set to increase during the hottest months of the year in the country (May to September). In the meantime, natural gas consumption has been rising steadily since 2009, and is expected to rise this decade.
Riyadh has made a 180-degree turn in the last two weeks, after its proposal to deepen the OPEC+ output cut deal by 1.5 million bpd got rejected by Moscow, which despite the gloomy demand picture in oil markets saw no reason to make additional production cuts.
Saudi Arabia’s decision to flood an already woefully oversupplied market has effectively started an oil price war in which Riyadh is aiming to squeeze any competition out of core markets such as Europe and Asia. The Kingdom followed up on its threat to flood the markets with oil by chartering as many as 31 supertankers to ship the extra crude. \
As the pain for oil exporters continues to increase, it is unlikely that Saudi Arabia nor Russia will unilaterally take action to once again cut production, as neither of them will want to be seen to have lost the oil price war.