Despite record oil exports in April as Saudi Arabia flooded the market with excess oil, the value of the Kingdom’s crude exports plunged by US$12 billion from April 2019 levels as the lowest oil prices in years hit revenues.
In April, the value of Saudi Arabia’s oil exports plummeted by 65.4 percent, or by US$12 billion (45.3 billion Saudi riyals), dragging down the value of the total merchandise exports of the world’s top oil exporter, data from Saudi Arabia’s General Authority of Statistics showed on Thursday.
The value of Saudi oil exports plunged by 23.5 percent compared to March, the statistics office said.
The share of oil exports in total exports fell from 77.4 percent in April 2019 to 64.7 percent in April 2020.
China was Saudi Arabia’s main trading partner for merchandise trade in April 2020, with Saudi exports to China valued at US$1.9 billion (7.16 billion riyals).
Saudi Arabia made good on its promise to flood the market with oil after the collapse of the previous OPEC+ deal in early March, exporting a record 10.237 million barrels per day (bpd) in April 2020, up from 7.391 million bpd in March, data from the Joint Organisations Data Initiative (JODI) showed last week.
OPEC’s largest producer also saw oil export revenues fall in Q1 2020, by 21.9 percent to US$40 billion, when Brent Crude prices fell by as much as 60 percent.
Under the OPEC+ deal sealed in April, Saudi Arabia is reducing its oil production to 8.5 million bpd in May, June, and July, restricting exports to some customers in Asia, and significantly cutting shipments to the United States. Even though oil prices are now higher than they were in April, reduced oil shipments are set to continue impacting Saudi oil revenues, a main source of income for the Kingdom’s budget.
Saudi Arabia’s economy is set to shrink much more this year than initially expected, the International Monetary Fund (IMF) said earlier this week in an update of its projections from April. According to the IMF, the Saudi economy will crash by 6.8 percent this year, compared to an initial estimate of a 2.3-percent decline, as “disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions” in Saudi Arabia as well as in its key partner in the OPEC+ deal, Russia.
By Tsvetana Paraskova for Oilprice.com
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Furthermore, Saudi Arabia couldn’t have won the price war against Russia who had the advantage in terms of the price needed to balance its budget compared with Saudi Arabia’, lower lifting per barrel and better financial balance.
If Saudi continued with the price war for much longer, it would have bankrupted its economy and destabilized the country.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London