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Saudi Arabia Makes Good on OPEC+ Oil Cuts

Saudi Arabia seems to have made good on its promise to cut oil production by a record amount in June.

Observed Saudi crude exports for this month fell to 5.7 million barrels a day through June 29, the lowest since Bloomberg began tracking the flows at the start of 2017. That compares with 6.2 million a day in May. It’s a reduction equivalent to more than seven full supertankers over the course of the month.

As the coronavirus ravages the global economy and saps energy demand, the Saudis are leading a push among major oil producers to cut supplies. State company Saudi Aramco agreed to cap output at 8.5 million barrels a day from May-July as part of an OPEC+ agreement to boost prices. The kingdom then went a step further, pledging to pump 1 million barrels daily less than that in June.

While changes in exports and overall production are not perfectly correlated, those curbs are showing up in the kingdom’s shipments to the world’s biggest economies. Flows to China, usually the largest purchaser, are down by about 45% on a monthly basis in June to 1.1 million barrels a day.

A recent flood of Saudi oil to the U.S. has dropped sharply. Flows in June have shriveled to 224,000 barrels a day, compared with almost 1.3 million in April, a three-year high. Only three supertankers and a smaller vessel were observed carrying Saudi crude to the U.S. in June, though more may emerge as some cargoes update their final destinations.

Tankers hauling a combined 17 million barrels of oil from the kingdom this month haven’t yet indicated their ultimate port of call. It takes a ship roughly six weeks to sail from Saudi Arabia to the U.S. and about three weeks to China. Any vessel leaving for America now would arrive in the first half of August.

Source: Bloomberg

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