Arab News, Thursday, Jun 14, 2018 | Ramadan 29, 1439
Saudi Arabia raises oil output amid fears of supply crunch
Saudi Arabia posted the biggest month-on-month increase in oil supply of any
OPEC country in May, according to the latest report from the International
Energy Agency (IEA).
The Kingdom’s production was up 100,000 barrels per day (bpd) to 10.02 million
barrels. Domestically, more crude was burned in Saudi power plants during the
month, partly due to higher air-conditioning use.
The IEA noted meanwhile that only Saudi Arabia and OPEC’s other Middle East
members have the ability to ramp up production swiftly to alleviate any supply
shortages in the market. That is viewed as vital in the event of further output
drops from Venezuela, and expected shortfalls from Iran when US sanctions bite
later this year.
The report estimated that Middle East OPEC countries could increase production
in fairly short order by about 1.1 million bpd, and there could be more output
After oil prices surged to $80 a barrel in mid-May, Saudi Energy Minister Khalid
Al-Falih said that the Kingdom, along with other producers, would ensure the
availability of adequate supplies to offset any potential shortfalls.
According to information from data intelligence company Kpler, Saudi crude
shipments rose during May to 7.16 million bpd, up 250,000 bpd month-on-month.
“However, even if the Iran-Venezuela supply gap is plugged, the market will be
finely balanced next year, and vulnerable to prices rising higher in the event
of further disruption. It is possible that the very small number of countries
with spare capacity beyond what can be activated quickly will have to go the
extra mile,” the IEA said.
US President Donald Trump yesterday blamed OPEC for excessive oil prices. “Oil
prices are too high, OPEC is at it again. Not good!” Trump tweeted on Wednesday,
the second time in two months he blamed the bloc for higher oil prices.
Saudi Aramco is moving ahead with plans to raise output from offshore oil fields
by more than 1 million bpd by 2023 to compensate for declining onshore
production and to sustain overall capacity, which now stands at around 12
Aramco has invited bids to build new units to expand the Marjan oil field from
500,000 bpd currently to 800,000 bpd. Aramco also recently invited bids to boost
the 300,000 bpd Berri field by 250,000 bpd. The expansion effort also includes
the 550,000 bpd Zuluf field, where capacity will be raised by 600,000 bpd.
In May, the IEA said, higher flows from Saudi Arabia, Iraq and Algeria
outweighed a fall in Nigerian supply and further losses in Venezuela, lifting
OPEC crude production by 50,000 bpd to 31.69 million bpd. Crude oil output was
nonetheless down 610,000 bpd on 2017 due to Venezuela’s sharp decline.
For 2019, IEA anticipates growth of 1.4 million bpd due to a “solid” economic
background and an assumption of more stable prices. Demand growth for 2018 is
also forecast at 1.4 million bpd.
But downside risks were growing in the wake of the G-7 bust-up involving
President Donald Trump and his Western allies.
Dangers included the possibility of higher prices amid trade disruptions
prompted by the tariffs war unleashed by the US against China, but which has
also sucked in the EU, Canada and Mexico.
There were already signs of a slowdown in the growth of global trade volumes,
the IEA said, which was “a concern.”