ER Editor: A two-fer, indicating Russia’s ability to overcome western sanctions via its energy exports, as well as Saudi Arabia’s clear assistance to Russia in both buying its oil and helping it raise global prices. The West is being shut out, as it richly deserves to be.
Russia To Overtake Saudi Arabia As The Largest OPEC+ Oil Producer
By Charles Kennedy of OilPrice.com
Saudi Arabia will lose its status as the largest OPEC+ oil producer to Russia as it begins the unilateral cut of 1 million barrels per day (bpd), with the Kingdom pledging to pump around 9 million bpd in July and August—the lowest level in two years.
Excluding the deep cuts during the pandemic, a Saudi production of just around 9 million bpd would be the lowest level the world’s top crude oil exporter has pumped since 2011.
“The Kingdom’s crude output is set to plunge to a two-year low of around 9 mb/d in July and August, leaving it trailing behind Russia as the bloc’s top crude producer,” the International Energy Agency (IEA) said in its Oil Market Report on Thursday.
In a bid to push oil prices higher, or “stabilize the market” as Saudi Arabia and OPEC put it, the Kingdom announced last month a unilateral cut of 1 million bpd to its production levels for July, while the OPEC+ producers who had pledged cuts between May and December extended those cuts into 2024. Last week, Saudi Arabia said it would extend its unilateral production cut into August, and will be producing around 9 million bpd in both July and August.
“This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil market,” Saudi Arabia said on July 3.
Minutes after the Saudi announcement, Russia’s Deputy Prime Minister Alexander Novak said that Russia would cut its crude oil exports by 500,000 bpd in August in a bid to ensure a balanced market. However, the top oil official in Russia and lead OPEC+ negotiator, didn’t give any figures as to the volume of the Russian production and exports for August, nor the baseline from which the cut would be made.
The August cut in exports would mean an additional cut in oil production by 500,000 bpd in August, Novak’s office told Russian daily Vedomosti.
Saudi imports of Russian fuel soared tenfold in June
In the first half of 2023, the kingdom acquired nearly double the amount of Russian fuel imported for all of 2022
Saudi Arabia imported record levels of Russian fuel oil in June, bringing in 910,000 metric tons, a nearly tenfold increase from the same period last year, to meet summer power generation needs.
Since the start of 2023, Saudi imports of Russian fuel have nearly doubled from last year. As of June, the kingdom imported 2.86 million metric tons of fuel oil, exceeding the 1.63 million metric tons imported for all of 2022.
Alongside many countries in the Global South, the kingdom has been ramping up its purchases of discounted Russian fuel over the past several months, allowing Moscow to negate much of the effects of western sanctions and a G7 price cap imposed on their energy sector.
The news comes just over a month after Saudi officials announced plans to cut oil production levels by an extra one million barrels per day (bpd) in July – a cut that came on top of a massive reduction in oil output implemented since last October by OPEC+ member states, including Russia.
In May, Bloomberg reported, “Saudi Arabia is snapping up millions of barrels of Russian diesel that Europe no longer allows, while simultaneously sending its own supplies back to buyers in the EU.“
Traders and analysts believe the kingdom has been conducting this scheme to generate higher profits by taking advantage of western sanctions.
India and China are two other nations taking advantage of the situation, buying as much as 80 percent of the oil that Moscow exported in May.
“In May 2023, India and China accounted for almost 80 percent of Russian crude oil exports,” the Paris-based International Energy Agency (IEA) said in a report.
Russian fuel exports to Africa have also skyrocketed over the past year, increasing nearly 14-fold since the start of the war in Ukraine. Before March 2022, Moscow exported 33,000 bpd of refined products to African nations; by March 2023, exports soared to 420,000 bpd.
Featured image, rigs: https://www.neweurope.eu/article/russia-dethrones-saudi-arabia-worlds-largest-crude-oil-producer/
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