Saudi Arabia will boost its oil exports to over 10 million barrels per day in May, a spokesperson for the Kingdom’s Ministry of Energy said on Tuesday.
The boost in exports follows rising tensions in oil markets following a breakdown in talks between the Organization of Petroleum Exporting Countries (OPEC) and Russia on March 6 to secure a further oil output cut. Futures of Brent and WTI crude have plummeted to under $30 per barrel, as fears of an imminent price war between producers became a reality.
“The Kingdom of Saudi Arabia will utilize the gas produced by the Fadhili gas plant to compensate for around 250,000 bpd of domestic oil consumption, which will enable the Kingdom to increase its crude exports during the coming few months to exceed 10 million bpd.” the spokesperson said.
Last week, the CEO of energy giant Saudi Aramco, Amin Nasser, said that the company would raise its crude supply to 12.3 million bpd with customers due to receive the additional volume starting April 1. The Energy Ministry then later directed the company to hike its capacity to 13 million bpd.
Saudi Arabia’s total oil demand is 3.1 million bpd, according to data from energy analysts Rystad Energy.
“Given that they would like to produce 12.3 (including drawing down some storage), this is not unrealistic to boost exports to 10 million bpd in Apr-May bpd from 7 million bpd, but under the two circumstances. First, they will have to draw stocks as it is hard to ramp the production up by ~1.5 million bpd from spare capacity over just a one-two month period. Secondly, they will have to use more gas for power generation, freeing up oil for exports,” said Rystad Energy Senior Oil Markets Analyst Artyom Tchen.
Research suggests that Saudi Arabia is best prepared for an oil price war, with the lowest oil extraction costs of any producer at around $3 per barrel. On Monday, Khalid al-Dabbagh, the CFO Saudi Aramco, said the company was “very comfortable” with oil at $30 per barrel, adding that Aramco has a “massive capacity” to borrow but does not need any additional debt.