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Will Saudi Arabia Cause Colossal Damage for Crude Oil Futures?

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Saudi Arabia’s crude oil production  

Saudi Arabia is the largest crude oil producer and exporter among OPEC members. According to the Wall Street Journal, Saudi Arabia’s crude oil production hit 10.7 MMbpd (million barrels per day) in June 2017. OPEC and non-OPEC producers entered into a production cut deal to reduce crude oil production by 1.8 MMbpd from January 2017 to March 2018. Saudi Arabia’s crude oil production is 12,000 bpd (barrels per day) more than the capped production level. So far, it’s the highest production level for Saudi Arabia in 2017. Lower compliance to the production cut deal and high production from Saudi Arabia are bearish for crude oil (BNO) (FXN) (FENY) prices. Read OPEC’s Crude Oil Exports: Bullish or Bearish for Traders? for more on OPEC’s crude oil production and exports.

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Saudi Arabia’s crude oil consumption 

Saudi Arabia’s crude oil production rises during this time of the year due to the summer season. Crude oil is used to generate electricity for air conditioners during the summer. Saudi Arabia uses 25% of its crude oil for electricity, transportation, and residential and commercial purposes.

Changes in Saudi Arabia’s production and consumption impact crude oil prices. Moves in crude oil prices impact oil and gas producers such as Denbury Resources (DNR), ExxonMobil (XOM), and Bill Barrett (BBG).

Saudi Arabia’s crude oil export plans 

Saudi Arabia plans to export its full requirement of crude oil to Asian customers like China, India, and South Korea in August 2017. Saudi Arabia wants to maintain its market share. However, Saudi Arabia plans to cut its exports to the US and Europe in order to comply with the production cut deal in July 2017. To learn more, read Saudi Arabia’s Real Crude Oil Production and Export Plans. Any rise in Saudi Arabia’s crude oil exports could also weigh on crude oil prices.

In the next part, we’ll analyze how US gasoline demand impacts oil prices.

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