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Home / Business / Saudi Aramco's strategy has failed and Russia takes market share – Saudi Aramco (Private: ARMCO)

Saudi Aramco's strategy has failed and Russia takes market share – Saudi Aramco (Private: ARMCO)



In December last year, Saudi Aramco (ARMCO) announced US oil refiners about a "steep decline" in crude oil exports to the US starting in January. This was part of a plan to clear US commodity stocks at onshore prices. The idea was that US stocks are reported weekly and that a fall in US crude oil would have a major impact on world oil prices.

This is a page in the 1973-74 game book. Embargo the US, and see oil prices rise. At that time, they created a 400% increase in oil prices, which led to a worldwide recession, which was their power then.

But Aramco is now just a shadow of the former self when it comes to being able to control oil prices and cause economic damage. However, oil prices fell in 201

9, despite Aramco's US embargo. And oil stocks have been an investor disaster, and many E&P and oil service companies lost sixty percent or more of their value over the past 52 weeks.

As an example, the stock price of the California Resources Corporation (CRC) fell recently in just days. And it had been a favorite among E&P investors to start up

Aramco's US Embargo

U.S. imports of crude oil from Aramco actually fell in 2019. In the year ended August 2, others Aramco exports exported an average of 569,000bn / d, based on weekly estimates, about 27%, or 214,000 md / d, less than the same period in 2018.

This trend in lower exports to the US has accelerated. During the four weeks ending August 2, 2019, Aramco exported to the United States an average of $ 399,000 billion, a year-on-year decrease of 54.2%, or $ 473,000bn / d, less.

But this fall was of significance to the increase in US domestic production. The graph below shows the year's change in US crude production against the change in Aramco imports. The average gain in US production is 1,593 million barrels per day against a loss in Aramco imports of 214,000bn / d.

Crude imports have fallen in 2019 because US oil refiners do not need to import as much crude oil. But imports have increased most this year from Canada and Russia. (Yes, this is the same Russia that is a member of OPEC +. Russian oil companies either did not get the Saudi note to starve the United States, or more likely, ignored it.) Russia appears to have no problem removing US market shares away from Saudi Arabia and has even worked against the Saudis' strategy to withhold oil from the US market.

Based on monthly data from the EIA through May, imports from Aramco fell by 179,000bn / d, while imports from Canada and Russia increased by 187,000b / d. (Russian imports are only available in the monthly data.) [19659011] Refiners Control US Inventories, Not Saudi Aramco

In the past year, US commodity stocks have fallen by just 2.5 million barrels. In the same period last year they fell 17.1 million.

Regardless of Aramco's export strategy, US oil refineries will import the level they need to achieve their inventory goals. Even if Aramco's exports to the United States dropped to zero, it would not be a problem, provided Aramco's total crude production remained the same. In fact, there is a need for OPEC to reduce production to prevent global inventories from ballooning, and in fact it means Saudi Aramco.

Conclusions

The old days of US dependence on Saudi Arabia for crude imports are over. The United States is projected to achieve net oil independence by 2020.

Aramco cannot control US crude oil storage levels. US oil refiners can simply import crude oil from other sources, such as OPEC + Partner, Russia.

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Disclosure: I / We have no positions in any of the aforementioned shares, and no plans to commence any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I do not receive compensation for it (other than Seeking Alpha). I have no business relationship with any company mentioned in this article.


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