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Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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Saudi Arabia Books Supertankers To Flood U.S. Markets With Oil

Saudi Arabia’s state-run shipping company has hired multiple very large crude carriers to carry all the extra oil it plans on exporting next month—a rare move indeed for the shipping company that sports its own fleet of 41 tankers, according to Bloomberg sources.

Bahri, as the Saudi’s shipping company is known, has booked passage for its crude oil on three VLCCs, each with the capacity to haul 2 million barrels of crude. The preliminary bookings are heading to the US Gulf Coast, the sources say—but the bookings could still fail.

The extra VLCC charters are a logical step given Saudi Arabia’s professed plans to ramp up its crude production to more than 12 million barrels per day, after the OPEC+ fell apart last Friday when Russia refused to join in on additional production cuts.

Next month, Saudi Arabia has plans to increase shipments of crude to its prized market, Asia, who will be more than happy to take on more oil at the substantial discount that the Saudis are selling their oil for as part of its oil war strategy. However, trips from to the US take 40 days, and Bahir’s own tankers would not return to Saudi Arabia in time to load these extra volumes.

But all that could change in the blink of an eye.

­­­­The other active participant in the oil price war, Russia, said today that it had not ruled out yet the possibility of rekindling its love affair with Saudi Arabia by returning to cooperation with OPEC should necessity dictate. Russian oil companies and the Russian Oil Ministry will hold talks on Wednesday to discuss the matter, Reuters sources said on Tuesday.

By Julianne Geiger for Oilprice.com

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  • Mamdouh Salameh on March 10 2020 said:
    Does Saudi Arabia has the production capacity to flood both the US market and the Asia-Pacific region? Chartering extra VLCCs is the easy part, filling them with crude oil isn’t.

    Moreover, Saudi Arabia’s strategy of flooding the global oil market with oil for the purpose of enhancing its market share at a time of a huge glut in the market estimated at 5.0 million barrels a day (mbd) and a coronavirus outbreak is the most ludicrous strategy I ever heard of. It will only lead to a far bigger fiasco than in 2014. If crude oil buyers are not buying crude from an already glutted market because of the outbreak, how could flooding the global oil market and augmenting the glut further prompt them to buy.

    Furthermore, if Saudi Arabia is banking on improving its market share by offering discounted prices, so could other producers.

    Are the Saudis so naive to believe that American buyers will buy discounted Saudi crude when they know that this will accelerate the demise of the US shale oil industry.

    Saudi Arabia’s claim of having a production capacity of 12.5 mbd is yet to be tested. Moreover, Saudi oil production is in decline having peaked at 9.65 mbd in 2005. It can produce some 8.0-9.0 mbd with another 700,000 barrels a day (b/d) to 1.0 mbd coming from stored oil on tankers or underground.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Carlos Everett on March 10 2020 said:
    I do not think that Russia or Saudi is very concerned about the climate problem right now and if renewables truly want to borrow to finance energy output, they better be prepared for years of negative returns.

    I am not saying this is right and i applaud the US companies who are trying to mitigate any emissions, but i believe the journalists who are looking at theory of a better world with less emissions better understand, you are miscalculating the impact of various world nations that can out compete anything on a BTU basis. It is sure folly to think that state governments in the US can dictate long term contracts on a btu basis with renewables that try to compete with world nations.

    The solution lies in finding a way for co2 to be used as a resource or finding a way to eliminate emissions with carbon combustion engine. Do not underestimate the America system, as if you look at 1960's figures on emissions vs 2020 emissions coming from the carbon combustion emissions the reduction is approx 95% .

    The key lies in research.
  • Jack Atherton on March 10 2020 said:
    Saudi is flush with cash from the sale of Aramco. They look on this as a way to preserve their dominance in the oil market. The rest of the world financed it by buying aramco.

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