Saudi Arabia may have started to fill up its oil tanks, export and domestic consumption data suggests, as cited by Bloomberg’s Julian Lee. Traditionally, the summer months are the season of peak local consumption of crude, Lee notes, as air conditioning demand hits a high. However, this year temperatures have been below the five-year average for the period, and exports have not registered any marked increases, either.
Saudi Arabia has abundant storage capacity and over the last three years, stockpiles have been falling, from more than 300 million barrels to less than 250 million barrels, according to data from JODI quoted by Lee. At the end of April this year, they stood at the lowest level since 2011, but in May they went up for the first time since last November. They may well have continued to rise in the following months as well.
At the same time, Reuters cited two unnamed sources from OPEC as saying Saudi crude oil production in July fell by 200,000 bpd instead of rising, as per the OPEC+ agreement from June 22. This is a surprising turn of events after Saudi Arabia assured importers that India and the United States it would ramp up production quickly and solidly.
The decline is all the more surprising after Saudi reports to OPEC that the Kingdom boosted production in June by as much as 500,000 bpd, to 10.488 million bpd. Secondary sources data for June actually showed Saudi Arabia had produced an average of 10.42 million bpd, which was 405,400 bpd more than in May—still a substantial increase.
Saudi Arabia has storage capacity in excess of 40 million barrels of crude, both at home and abroad. Its biggest storage terminal is Ras Tanura, with 33 million barrels. Another major storage hub is the King Fahd terminal, with a capacity of 12.5 million barrels of crude. If Saudi Arabia has started replenishing these, it will gain a certain edge over competitors after the Iran sanctions begin to take their toll on international prices.