Historical moment in Aramco Headquarter
As the oil markets are shocked by the decrease in demand due to COVID-19, it has been a busy agenda as April begins. The controversy between Russia and Saudi Arabia during the OPEC+ meetings increased concerns on oversupply. While the main discussion topic was who will make the first step back, Aramco made a historic moment.
As the picture illustrates, the national company of Saudi Arabia decreased its production to 12.2 million barrels per day from the approximate level of 9.5 million barrels per day.
This moment is captured just a few days after the statement by Aramco. The swing producer showed that it was not a bluff and loaded 15 of its oil tankers with 18.8 million barrels. Thirty days consumption could provide additional 600.000 barrels per day, which is more than Libya’s production and maybe close to Venezuela’s. This move is followed by Trump’s call to Russia to open production adjustment discussions to the table.
In many ways, Saudi Arabia earned what they wanted in the first place; here is why.
1. Ongoing de-facto leadership of OPEC was denied by the participants of OPEC+ members and mainly Russia. The kingdom convinced the other members to cut the production.
2. By increasing the production to historical values (12.3 million barrels per day), the production adjustment negotiation started from this level, even though the deal was to cut production from 11 million barrel per day, Saudi Arabia’s final output will be very close to first agreement.
3. Proposed cuts will be higher, and other producers will provide most of them.
4. Even though Trump has the credits for gathering the members on the table again, it was Saudi Arabia’s move put players on the table.
This heart massage will not save the oil prices from collapsing, but the producers had a moment of breathing and thought further.