• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 39 mins The Plastics Problem
  • 3 hours Emissions Need To Be Halved To Avoid 3C Warming
  • 3 hours Confirmed: UN Expert Urges Probe Of Saudi Prince Over Khashoggi Killing
  • 37 mins OPEC, GEO-POLITICS & OIL SUPPLY & PRICES
  • 30 mins Hormuz and surrounding waters: Energy Threats to the World: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack
  • 5 mins Coal Boom in Asia is Real and a Long Trend
  • 53 mins The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 3 hours The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 57 mins Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 53 mins US to become net oil exporter in November: EIA
  • 22 mins Trudeau approves Trans Mountain Pipeline
  • 4 hours Fareed Zakaria: Canary in the Coal Mine (U.S. Dollar Hegemony)
  • 3 hours Hydrogen FTW... Some Day
  • 1 hour US Shale Drilling lacks regulatory body.
Alt Text

Expect More Bearish News For Oil

A very bearish inventory report…

Alt Text

The Oil Price Risk Analysts Are Ignoring

While geopolitical tensions in the…

Alt Text

Oil Resilient Despite Trade Talk Failure

Oil prices fell and quickly…

Andy Tully

Andy Tully

Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com

More Info

Trending Discussions

Saudi Influence On Oil Markets Slipping

If you ever need to be reminded just how influential Saudi Arabia is in the global oil industry, just look back to last week.

On March 22, Saudi Oil Minister Ali al-Naimi said his country was at that point producing about 10 million barrels of crude per day, the most since July, the onset of the glut responsible for the current drop in prices. That news sent down oil prices even further in trading the next day.

Then on March 26, oil prices spiked, as Saudi Arabia and its Gulf Arab allies began a military operation in Yemen, which sits on the Bab el-Mandeb Strait, a key shipping passage between Europe and the Arab Gulf.

And of course Saudi Arabia, at its most influential, persuaded all 12 OPEC members, including some reluctant ones, to maintain what is now a 3-year-old production level of 30 million barrels a day in a price war against US shale producers and others believed to be responsible for the glut. Related: Three Triggers That Will Send Oil Crashing Again

That may be about to change, however, according to a new study from Rice University’s Baker Institute For Public Policy. The document, “A Refined Approach: Saudi Arabia Moves Beyond Crude”, published online March 20 in the magazine Energy Policy, says Saudi Arabia is diversifying from being exclusively a generator of crude oil and will now aim to provide refined oil products as well.

“This is the type of change we expect to see as a state moves to a more advanced stage of development,” Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute, told Rice’s Office of Public Affairs. Related: Oil Prices Withstand Increased Saudi Production For Now

“There are plenty of upsides from investing in refining, including reducing the kingdom’s reliance on fuel imports and capturing margins now lost to the competition,” Krane said. “Refining also allows the Saudis to export their heavy crude oil to a wider array of customers, beyond the select few importers who have invested in configurations that can handle heavy crudes.”

At the same time, though, this might weaken Saudi Arabia’s long-held role as the global “swing supplier” of crude oil, Krane’s report concluded. With more oil production diverted into refining, it said, the kingdom will have reduced flexibility to use increases or drops in its own oil production to influence prices and prevent price volatility. Related: Beyond Iran And Pakistan: 7 Nuclear Wannabes

The impetus for this shift is a 1.2 million-barrels-a-day expansion in Saudi refining capacity by Saudi Aramco, owned by the kingdom, and two partner companies, the report said. That, plus the rise in other domestic demand, rose to 3.1 million barrels per day, about 27 percent of the country’s total oil production. If that growth rate continues, Saudi domestic oil consumption would double by 2025.

As a result, Krane’s report said, Riyadh may become “less willing or able” to fine-tune its exports to keep the world oil market stable. “In the process, Saudi Arabia may have to update the old ‘oil for security’ relationship that links it with Washington,” Krane wrote. “It may instead turn to a more diverse set of economic and investment ties with individual companies and countries, including China.”

But Saudi Arabians didn’t get rich – and stay rich – just because it has a lot of oil. Krane’s article says the kingdom seems to be carefully adjusting this transition in a way that doesn’t anger the United States and thus “maintain economic integration with powerful countries like the United States,” the report said. “[The Saudis] appear to be succeeding by controlling the crude supply to refineries owned by Saudi Aramco, providing discounts when competition demands it.”

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment





Oilprice - The No. 1 Source for Oil & Energy News