America’s biggest oil field just…
Texas senator Carlos Uresti could…
Saudi crude exports rallied in January to their highest levels in nine months, ending a disappointing slump in demand throughout much of 2014.
Oil exports from Saudi Arabia, the world’s most copious exporter, rose to 7.47 million barrels per day in January, a significant step up from the 6.934 million barrels per day shipped the month before, according to the UN’s Joint Organizations Data Initiative (JODI).
Oil production in Saudi Arabia, however, was steady in both months: 9.680 barrels per day in January compared with 9.630 barrels per day in December, JODI found.
For the Saudi oil industry, the numbers are a refreshing change from 2014, when it exported 5.7 percent less oil because of a decline in demand from China, its largest Asian customer, demonstrating that the plunge in oil prices since June didn’t help increase demand. Chinese data show it reduced imports of Saudi oil by 7.9 percent in 2014, while increasing imports from Angola, Iran, Iraq and the UAE.
Saudi exports averaged 7.11 million barrels a day in 2014, a drop from the 7.54 million barrels a day the year before and the lowest since 2011, according to JODI data. The worst month of last year was December, when exports dropped 5 percent below November’s level of 6.9 million barrels a day.
“When you see your shipments to China declining, you have to be worried about your market share,” John Sfakianakis told Bloomberg. He said Saudi Arabia needs to keep exports at a minimum of 7 million barrels a day to maintain its $229 billion 2015 budget, and the cost of a barrel of oil must average $80 this year. That price, though, has been closer to $60.
Yet market share is the driving force of Saudi Arabia’s – and OPEC’s – strategy to restore pricing balance to the oil market. At the cartel’s meeting in November, under Saudi leadership, OPEC refused to reduce overall production from 30 million barrels a day in an effort to keep prices so low that US shale producers and others with expensive extraction methods can’t make a profit.
Until then, OPEC had been losing customers to American oil companies, and US demand for the cartel’s oil was diminishing. Since then, though, heavy financial pressure has been on shale producers, who have been forced to cut spending and reduce the number of rigs they need to extract oil trapped in shale.
Saudi Oil Minister Ali al-Naimi said the rise in Saudi oil exports in January shows that demand is beginning to rebound and that he believes that oil prices may begin to stabilize after hitting their lowest point in six years during that month.
In fact, al-Naimi has been predicting that outcome for weeks. On Feb. 25, he told reporters in the southwestern Saudi city of Jazan that the price of benchmark Brent crude had stabilized at $60 per barrel, showing that the oil market has cooled off and that his strategy put in place at the November OPEC meeting was working.
Not only was the low price of oil putting a financial pinch on OPEC’s competitors, it was beginning to stimulate demand, both in China and the United States, and said it was not only useless but dangerous not to recognize this positive shift. “Why do you want to rock the markets?” he asked. “The markets are calm. … Demand is growing.”
Whether the markets remain calm and demand continues to grow, though, is another matter. Data for one month, no matter how accurate, doesn’t make a trend, and there’s no evidence yet that demand for oil will keep rising.
By Andy Tully of Oilprice.com
More Top Reads From Oilprice.com:
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com