Crude oil shipments from Saudi Arabia have fallen to levels not seen for years, which may limit the benefits the monarchy will receive from the current spike in prices. Official data indicates that last month, the kingdom supplied around 5.6 million bpd. It now effectively exports simply a little over what it did during the beginning of the Coronavirus pandemic, when the market for oil and travel throughout the world fell precipitously.
OPEC+, the coalition of the Organization of the Petroleum Exporting Countries plus Russia, has been under pressure from Saudi Arabia to reduce oil output in order to stabilize prices.
By spearheading the reduction of output, Riyadh has demonstrated that its advocacy is supported by action. Riyadh’s heavyweight status has benefitted the United Arab Emirates and Moscow during the harsh worldwide campaign against the latter following the Ukraine war.
Abu Dhabi was given a temporary exemption to increase its output to 300,000 barrels per day by 2025 during a May Opec+ summit. Moscow, however, has pushed its way into Saudi main energy marketplaces in Asian states while being blocked off from the European Union due to western embargoes.
Beijing purchased almost half of Russia’s crude shipments in April, with India had a 35%-share of the sale. In addition, Tehran has significantly expanded its oil exports to Asia in violation of American sanctions. Saudi Arabia is a major global oil supplier with the industrial potential to increase output rapidly. The action has the potential to shock financial markets, as it happened in March 2022 when the kingdom and Russia started a price faceoff.
Oil-Reliant Giant
It should be noted that Brent oil prices increased by more than 10% last month and closed at $87.84 per barrel yesterday, giving Riyadh some comfort. Nonetheless, the IMF projects that Riyadh would require $96.20 worth of oil in 2024 in order to cover its finances. For Saudi Arabia, the selling price for petroleum has significant sociopolitical and financial ramifications.
Vision 2030 is a set of societal and socioeconomic modifications that are being overseen by Saudi Crown Prince who took over the power in 2016. The programs aim to liberalize the kingdom’s traditional society and attract entrepreneurs and tourists from the Western industries and societies. However, he can’t realize expenditures without the oil money.
Neom has been scaled curtailed by the monarchy owing to a lack of foreign investors’ involvement. Originally envisioned as a $1.5 trillion megacity, Neom was expected to ultimately involve a 170-kilometer city of Line and build one of the largest cities of the world. Saudi authorities now predict that by 2030, the city would have less than 300 thousand inhabitants, as opposed to 1.5 million. By 2030, just 2.4 km of the 170-kilometer metropolis will be finished. The fresh oil challenges may instigate further restrictions for the kingdom to proceed with their ambitious plans for the future of the country.
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