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Saudi Oil Exports Holding Strong Despite Production Cut Commitment

Saudi Arabia’s crude oil exports fell just slightly in February, in stark contrast to the bold voluntary production cuts that the Kingdom had offered to make, according to PetroLogistics and Kpler data cited by Reuters.

Saudi Arabia had shocked the oil markets when it voluntarily offered to withhold an additional million barrels of oil production per day from the market in addition to what it was already tasked with cutting as part of the OPEC+ group. It vowed to continue those cuts through April.

But data shows that Saudi Arabia’s amibitious commitment to cut an extra million barrels per day hasn’t spilled over into exports. According to PetroLogistics, Saudi Arabia’s February exports likely fell by just 300,000 bpd.

Kpler’s estimates are even more disappointing. Their data shows that Saudi’s oil exports fell by 194,000 bpd, while domestic inventories shrunk by 119,000 bpd. According to Kpler, however, Saudi Arabia’s exports toward the end of February were lower than at the beginning.

Related Video: Can Saudis Defend Aramco from Houthis?

Saudi’s Energy Minister Prince Abdulaziz bin Salman Al-Saud was asked after the last OPEC+ meeting last week if he would comment on reports that the country had not fulfilled its voluntary cuts as promised. The Energy Minister refused to answer since the cut was voluntary and not part of an OPEC+ commitment, according to Reuters, adding that “we are trustworthy people.”

While the market is not fully seeing Saudi Arabia’s million barrels per day taken off the global market, the market certainly is enjoying the after-effects of Saudi Arabia’s commitment not only to cut an additional million barrels per day but to keep doing so through April.  The price of a Brent barrel has surged $8 since February and is now trading at more than $68 per barrel.

By Julianne Geiger for Oilprice.com

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  • Mamdouh Salameh on March 11 2021 said:
    This could be a case when production cuts aren’t real cuts.

    A very thin line separates Saudi oil production from its oil inventory. So when Saudi Arabia says it can supply the market with 12 million barrels a day (mbd) for instance, it shouldn’t be taken to mean that it has a production capacity of 12 mbd. It only means that Saudi Arabia will produce 9 mbd and withdraw 3 mbd from its oil inventory to supply the market.

    Similarly, Saudi Arabia could promise to make a voluntary cut from production from say 10 mbd to 9 mbd while still exporting virtually the same volume. This is so because it offsets what it describes as a 1 mbd-cut in production by a withdrawal of an equivalent volume from its inventories.

    In real life and with Saudi consumption being the same, cutting production by 1 mbd should result in an automatic reduction of exports by the same volume unless Saudi Arabia withdrew 1 mbd from its inventory thus maintaining the level of exports as the reports are suggesting.

    That may be the reason why Saudi’s Energy Minister Prince Abdulaziz bin Salman refused to comment when asked on reports that the country had not fulfilled its voluntary cuts as promised.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • George Doolittle on March 10 2021 said:
    The US refining Industry is barely running at what..60%? Hardly a bullish indicator for oil prices going forward. Worse still is how natural gas has so thoroughly displaced coal and now is doing so to oil and diesel fuel now as well. The USA barely had 6 weeks of Winter this Year...the most mild I can recall since 1998-1999. I would be very wary of going long and strong US trucking as a consequence at the moment therefore as finished goods start piling up to the rafters for every consumer good imaginable. Utilities look very strong in the USA at the moment and both very safe and very much on sale as this is how the US lng and propane in fact gets exported and not by using distillate fuels anymore. Methanol it should be noted is "clean diesel" as well and all natural gas based with Louisiana, West Virginia and possibly Washington State as suddenly new major producers. Also there is the BP Whiting Refinery in Northwest Indiana which looks set to flood the upper mid-west with refined product imminently...let alone what Canada starts sending into the USA as temperatures suddenly moderate in the USA.

    Most stimulus checks have already been spent.

    I would expect oil prices to moderate in the coming weeks once the Spring Break craziness runs its course.

    Long Amtrak
    Strong buy

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