OGV Energy - Issue 31 - April 2020

Page 10

10

REGIONAL REVIEWS: MIDDLE EAST

By Aditya Saraswat, Senior Upstream Analyst at Rystad Energy

No middle ground in Middle East PRICE WAR TITLE HERE

MIDDLE EAST REVIEW SPONSORED BY

At Craig International, procurement isn’t just about processes, products and numbers. We promote a culture of ownership among our people, who are trusted to get on with the job on your behalf. We’re proud of how we serve clients. We’re always looking for new ways to add value and routinely introduce new technological solutions to make service delivery even simpler, smoother, faster. When it comes to procurement, we get it. Adding value, innovation and efficiency at every turn in your supply chain.

A month after powerhouses Saudi Arabia and Russia failed to reach an agreement over production cuts and the oil price has dwindled to less than $30 per barrel (bbl), with no signs of stopping. Unleashed, the middle eastern giants are rearing to gain market share by heavily discounting crude grades and putting their crude on wholesale. Amidst it all, the second quarter already looks terribly oversupplied as an oil market struck by the coronavirus shows little appetite.

O

PEC+ member countries are now aiming to utilize their maximum capacities to capture the majority of the oil market. Meanwhile, Saudi Arabia is preparing to deploy the equivalent of an atomic bomb upon the oil market in April, with plans to supply 12.3 million barrels per day (bpd) of crude to the market next month. For this ambitious target, the kingdom will have to rely on some draws from commercial storage, as Rystad Energy estimates their upstream crude production capacity – without any additional drilling – is limited to around 11.5 million bpd in the short term. In line with this, Saudi Arabia has hired 25 to 30 extra oil tankers by state tanker company Bahri and notified field supervisors to prepare fields for maximum output. Saudi Arabia’s all-time high crude production was previously achieved in November 2018 when it produced 11.1 million bpd. For now, we expect crude production to rise to 10.8 million bpd from 9.8 million bpd in Feb 20, and to increase further to 11.2 million bpd in May 20. However, we believe Saudi Arabia is able to meet, and possibly exceed, the 11.0 million bpd production target as soon as April. At 10.8 million bpd of upstream production, the stock draws at Saudi-controlled storage facilities would have to amount to 1.5 million bpd in April (45 million barrels).

www.ogvenergy.co.uk I April 2020

MIDDLE EAST REVIEW sponsored by


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.