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Saudi Arabia’s oil exports drop as it loses market share to Russia and UAE

Saudi Arabia Faces Decline in Crude Oil Exports Amid Increased Competition from Russia and UAE; Market Implications for Vision 2030

Saudi Arabia’s Crude Oil Exports Plummet as Russia and UAE Gain Market Share

Saudi Arabia’s crude oil exports have reached a significant low, dropping to levels not seen in years, which could diminish the potential benefits the kingdom might otherwise reap from recent surges in global energy prices. Data from Bloomberg reveals that in June, Saudi Arabia’s oil exports totaled approximately 5.6 million barrels per day. This volume is only marginally higher—by 250,000 barrels—than the exports recorded at the beginning of the Covid-19 pandemic, when global travel restrictions and a collapse in oil demand led to a dramatic reduction in oil markets.

Saudi Arabia has been a key driver within the OPEC+ coalition—a partnership between the Organisation of the Petroleum Exporting Countries (OPEC) and other major oil-producing countries, including Russia. The kingdom has played a pivotal role in advocating for and implementing significant cuts in oil production to support and stabilize global oil prices. This aggressive approach has seen Saudi Arabia leading the charge in reducing output, a strategy intended to balance the market and enhance prices. However, this strategy has also allowed other nations, particularly Russia and the UAE, to increase their own market shares at Saudi Arabia’s expense.

In a notable development from a May OPEC+ meeting, the UAE was granted a special exemption that permits it to boost its oil production by an additional 300,000 barrels per day starting in 2025. This adjustment has enabled the UAE to capitalize on Saudi Arabia’s reduced output and expand its presence in the global oil market, thereby gaining market share and increasing its influence in the industry.

Meanwhile, Russia, which has been constrained by Western sanctions due to its ongoing conflict with Ukraine, has successfully penetrated Saudi Arabia’s traditional oil markets in Asia. In April, Russia saw a substantial portion of its crude oil exports purchased by China, which accounted for 48 percent of Russia’s total exports, with India securing 35 percent. Additionally, Iran has significantly increased its oil shipments to Asia, directly challenging Saudi Arabia’s dominance in the region and further intensifying competition.

Saudi Arabia, despite being one of the world’s largest oil producers with the capacity to quickly ramp up production, has faced a complex market landscape. The kingdom’s ability to adjust its production levels rapidly can influence global oil prices, as evidenced by the significant price war that erupted between Saudi Arabia and Russia in March 2022. Despite the current market challenges, Saudi Arabia achieved a notable increase in Brent crude prices in June, with prices rising by over 10 percent to reach $87.84 per barrel on Friday. Nevertheless, the International Monetary Fund (IMF) estimates that Saudi Arabia needs an oil price of $96.20 per barrel to balance its budget for 2024, highlighting the financial pressures the kingdom faces.

The volatility in oil prices has far-reaching geopolitical and economic implications for Saudi Arabia. Crown Prince Mohammed bin Salman is overseeing a series of transformative economic and social reforms under the Vision 2030 initiative. This ambitious program aims to diversify the kingdom’s economy away from its heavy reliance on oil and to open up its traditionally conservative society to Western tourism and business. However, the success of these reforms heavily depends on sustained oil revenue, which funds the vast investments required for such initiatives.

With foreign investment lagging behind expectations, Saudi Arabia has had to reassess and scale back its plans for the Neom project, a $1.5 trillion megacity project that was initially envisioned to be 33 times the size of New York City and feature a 170-kilometer straight-line city. The original goal was to house 1.5 million people by 2030, but projections now estimate a population of fewer than 300,000. Additionally, only a small segment—2.4 kilometers—of the planned 170-kilometer city is expected to be completed by 2030.

The decline in Saudi Arabia’s oil exports and the resulting shifts in market dynamics underscore the kingdom’s challenges as it navigates the complex global oil landscape and strives to implement its ambitious economic reforms. The kingdom’s efforts to balance its oil production with global market demands and geopolitical pressures will be critical in shaping its future economic stability and growth.

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