DUBAI: Saudi Arabia is to boost exports of crude oil to a record high in a new show of strength on international energy markets.
From May, the Kingdom will export about 600,000 more barrels of oil per day on top of the current level of 10 million barrels, even as demand and crude prices have been falling.
The extra exports have been made possible by switching to gas for domestic energy generation, and by lower domestic demand caused by the coronavirus pandemic, an energy ministry official said.
Global demand for crude is down as much as 20 percent by some estimates because of stalled economic activity. Oil prices on International markets were volatile again yesterday. Brent, the Middle East benchmark, dipped sharply before closing up by about 5 percent at just over $26 per barrel. West Texas Intermediate, the US standard, fell below the significant $20 per barrel level. It recovered slightly, but still closed about 8 percent down.
US and Russian presidents Donald Trump and Vladimir Putin discussed both oil prices and the coronavirus pandemic in a telephone conversation on Monday.
Trump said he was concerned about the effect of falling prices on the US oil industry, which has higher costs than either Saudi Arabia or Russia. “We don’t want to have a dead industry,” he said. “I never thought I’d be saying that maybe we have to have an oil price increase, but we do.”
However, experts said the new Saudi export levels were a sign that there would be no early truce in the “oil price wars” following the end of the Saudi-Russia alliance to limit output. On top of already announced discounts, the export increase “will translate into a very low price for Saudi crude,” Olivier Jakob, director of Swiss-based energy consultancy Petromatrix, told Arab News.
Others said the Kingdom’s strategy of taking market share at the expense of high cost producers, especially in the US, was beginning to pay off. The strategy was a “game theory masterstroke” that would re-assert Saudi dominance of global energy markets, said Antoine Halff of the Columbia University Center on Global Energy Policy.