Saudi Arabia’s crude oil exports rose in September to around 6.2 million barrels per day (bpd). This looks to mainly be due to increased buying from India and South Korea. Just a month ago, Saudi Arabia was exporting roughly 5.7 million bpd. In August, OPEC and OPEC+ production restrictions eased somewhat, and OPEC production increased by 1 million bpd. The production reduction agreement between OPEC and OPEC+ succeeded in removing about a tenth of global supply off the market.
China’s Crude Stockpile
The increased buying by India and South Korea coincided with a dip in demand from significant purchaser, China. While the lockdowns due to COVID-19 were in full swing around the world, China took advantage of the record low demand and subsequently low prices for crude and stockpiled until it could hold no more.
Crude prices have been steadily rising, but they are still 30% lower than they were last year. And Saudi Arabia has also just this week begun cutting prices to the United States and to China. According to WorldOil.com, “State oil producer Saudi Aramco is cutting its benchmark Arab Light crude more than expected and lowering the grade to a discount for the first time since June for buyers in Asia. It’s the second-consecutive month of cuts for barrels to Asia. Aramco will also trim pricing for lighter barrels to northwest Europe and the Mediterranean region.
Aramco is reducing pricing to Asia for October shipments of the Light grade by $1.40 a barrel, to 50 cents below the regional benchmark. The company was expected to pare pricing by $1 a barrel, to a 10-cent discount, according to a Bloomberg survey of eight traders and refiners.”
Saudi Arabia: A second wave?
This cut in prices may indicate that Saudi Arabia fears the coming of a second wave of COVID-19. As many countries continue to recover economically, a second round of lockdowns could be catastrophic not only for those countries’ economies but also for the fossil fuel industry.