Saudi shipping less crude
Saudi Arabia, the world’s biggest crude oil exporter, shipped 5.7% less oil overseas last year led by a decline in China, its biggest customer in Asia, in a sign the price rout did little to revive demand.
Shipments averaged 7.11 million barrels a day, down from an 11-year high of 7.54 million barrels a day in 2013 and the lowest in three years, according to data from the Joint Organisations Data Initiative. In December, exports dropped 5% from November to 6.9 million barrels a day.
Crude prices fell almost 50% last year as the Organization of Petroleum Exporting Countries sought to defend market share amid a U.S. shale boom and a global glut estimated by Qatar and United Arab Emirates at 2 million barrels a day. Saudi Arabia will maintain output, Oil Minister Ali Al-Naimi said in December, according to the state-run Saudi Press Agency.
“2014 was a tough year for Saudi Arabia and OPEC,” said John Sfakianakis, head of Middle East at Ashmore Group Plc, the London-based money manager specializing in emerging markets. “Demand is sluggish, the U.S. is importing less, China’s economy is not growing by double digits, and supply from outside OPEC was not slowing down.”
China, Saudi Arabia’s largest customer in Asia, cut imports of Saudi crude by 7.9% in 2014, while it increased imports from Iran, Iraq, Kuwait, Angola, and U.A.E., according to official Chinese data.
“When you see your shipments to China declining, you have to be worried about your market share,” Sfakianakis said. Saudi Arabia needs to keep exports at a minimum of 7 million barrels a day for the 860 billion-riyal ($229 billion) 2015 budget, he said. Brent oil must average $80 this year for the budget to break even, he said. Crude was $61.07 a barrel today.
The drop in crude exports explains to some extent why Saudi Arabia is offering discounts on crude, according to Sfakianakis, a former adviser to the Saudi government. Saudi Aramco, the state-run oil company, offered Asian customers the biggest discount on its benchmark crude in at least 14 years for January sales. It also cut prices for all grades it sells to U.S. refineries.
Saudi Arabia led OPEC in opposing calls by other members including Venezuela to reduce supply. The 12-member group accounts for about 40% of global production.