Saudi Arabia faces setback amid bearish oil market

Saudi Arabia faces setback amid bearish oil market


Is crude exporting kingdom really on a losing track since there remained an uncertaintywithinglobal oilmarket? Latest reports have revealed oil exporting giant being turned down from half of the most important nations it had been selling oil for over three years of time-span – despite of its constant efforts to raise production leverages.

INSIGHT: Later in 2014, Saudi Arabia strategized tomaintain its crude market share, even though the global market was destabilized with supply havoc.

“Saudi Arabia had very difficult time selling oil in this environment. Its rivals are going into a very crowded market in a very aggressive way.”- Citigroup analyst, Ed Morse

An overview of crude exporting scale between 2013 – 2015, show Saudis to have been defeated in 9/15 oil markets by rivals like United States, China and South Africa.

Imports data compiled by FACTS Global Energy Group, suggeststhe country strategy had suffered setbacks in some of its significant customer countries last year.Its shares of total Chinese oil imports dropped from more than 19% to 15%. Reason behindisRussian over-supply. Similarly, its South African imports dropped abruptly from 53% to 22%, as Nigeria and Angola increased their deliveries.Over this period, Saudi Arabia also lostits gripover South Korean, Thai, Taiwan global market share.Share of US imports fell from 17% to 14%, as well.

Another data upon comparing estimates, revealed Saudi Arabia to have gained a minor global market share in 2015 than in 2014. Moreover, the share statistics were also BEARISH from that of year 2013’s result. An average market share loss across the 15 countries cited a slower pace in last yearthan 2014.

It’s worth mentioning here that Brent crude, the international oil benchmark plunged to less than US$ 30/barrel from US$ 115 in mid-2014 – a 13-year low rate scale.

Last month, Saudi Arabia announced to cease off its production at January leverage. Following the announcement, Qatar, Russia and Venezuela marked solidarity with oil exporting emperor. However, thisdecision policy partly projects towards the damaging impact of bearish crude costuponthe states’ stronger economies.

Keeping this is caution; Saudi Arabia had already been securing its grounds in India, Japan and Brazil.

As per *reports from Saudi oil database (backed by OPEC), Jodi:

  • crude exports in 2015 represents 8.1% of global oil demand
  • crude exports in 2014 represents 7.9% of global oil demand
  • crude exports in 2013 represents 8.5% of global oil demand

(*estimates exclude exporter’s own requirement)

The kingdom has increased its focus in European region by striking supply deals with traditional buyers of Russian crude oil, i.e. a Swedish refiner, Preem, and PKN Orlen and Lotos, Polish counterparts (source: Int. Edition of Financial Times).

Saudi Aramco, as forimplementing the strategy announced by country’s oil ministry, had raised production upto 10 million barrels/day – since when Organization for Petroleum Export Countries (OPEC) held its last meeting.  As per some analysts, energy firm is using its financial muscle to acquire more stakes in overseas refineries to lock in crude sales. Upon request, no comments had been made, with regard to this.

“This is the future Saudi export strategy; create captive markets in important importing countries by owning refineries in those countries. That way their market share is secured.” – Jim Krane from Rice University’s Baker Institute for Public Policy

“There’s just been too much U.S. crude builds lately for the market to ignore,” said Tariq Zahir, who is betting WTI for delivery in the near-term will weaken further versus long-term contracts, diffusion further anarchy in global crude market.

Exclusive reports obtained from Wall Street Journal states Brent and WTI futures to have TRADED lower than US$ 40/barrel – a certain conviction that market fundamentals aren’t coping well to let cost return to mid, or probably even lower to US$ 30 levels. Brent (LCOc1) was BEARISH with 38 cents, i.e. 1% at US$ 40.06/barrel at 1657 GMT. New York-based WTI (CLc1) was BEARISH with 20 cents, i.e. 0.5%, at US$ 39.26.