There is an unfortunate tendency for those outside the oil market to oversimplify the supply and demand situation in the United States. The United States exports some of this crude and imports some, depending on prices and the grades that refineries are best inclined to process. While it is the largest oil-consuming nation in the world, it produces much of its own crude. The United States is situated differently than other major oil consumers such as China, India, Japan, and South Korea. There will certainly be little-if any-demand destruction in OPEC+ crude from the United States. Instead, we have seen a steady increase in demand despite the steady increase in price, strengthening Saudi Arabia’s position in the market. Even though oil-consuming nations are bemoaning high crude oil prices and moving to release barrels from the SPR, the release will have little effect on OPEC+ demand-certainly not from the United States. Now normally, there is some demand destruction expected at high prices. intelligence report fingered the Crown Prince as being behind the murder of Jamal Khashoggi in 2018. It is for this reason that Saudi Arabia isn’t keen on raising output just yet, least of all at the behest of President Biden, who has, according to Bloomberg, refused to speak to Crown Prince Mohammed bin Salman after a U.S. That is, unless oil prices continue to crash. While these calculations were based on Saudi Arabia producing 10.3 million bpd and Brent averaging $80 next year, it’s easy to see how the $300 billion revenue mark isn’t out of the question. This is remarkably close to the 9.794 million bpd produced in 2019.įor Saudi Arabia, who relies heavily on oil money, this translates into prosperity, particularly at higher oil prices.Īccording to Bloomberg calculations, Saudi Arabia is on track to earn the most money in eight years off the back of pumping oil-rivaling the some of the highs seen in the 2011-2014 period of prosperity when oil prices were above $100 per barrel. The latest Monthly Oil Market Report data shows that its production has gained significant ground-to 9.759 million bpd. Marred by the Covid-saturated market and its oil price war with Russia, The Kingdom’s production had sagged to 9.182 million barrels per day in 2020. Saudi Arabia’s production has come a long way this year. It was exactly as Saudi Arabia has warned: Covid 19 adds an unknown element to the market, and we shouldn’t be too hasty in production ramp ups or the wheels could fall off the market. It’s about another new strain of Covid and several consequential travel limits instituted this week. Although we expect the administration will take a victory lap regardless. Prices are not crashing because of President Biden’s announced release of 50 million barrels from the Strategic Petroleum Reserves, which hasn’t even happened yet. Leading up to OPEC+’s next meeting that will decide the fate of its future oil production, plummeting prices is only going to pressure the group to further curtail production-instead of increasing production as President Biden had hoped. As demand has not balked at these high prices, Saudi Arabia et al have little motivation to heed the calls of the White House to alleviate its own political woes courtesy of high retail gasoline prices.Īnd now, as of Friday, oil prices are crashing-and they are crashing spectacularly. Still, the possibility that OPEC+ would raise production in response to pressure from the White House was portrayed as a legitimate possibility in the media.īut OPEC+-largely influenced by its two largest producers, Saudi Arabia and Russia-is looking at a longer-term view.Īside from the long-term view of oil supply and demand-which Saudi Arabia in particular sees as swinging back into surplus early next year-Saudi Arabia seems to be enjoying the high life on the back of higher oil prices over the last few months. President Joe Biden to increase oil production to lower prices for oil-consuming nations. There was never really a good reason for Saudi Arabia to comply with the wishes of U.S.
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