Why Saudi Arabia's crude oil exports are set to rise from May?

Increased Saudi Arabian production quotas in May are set to drive crude oil export growth, according to shiptracking agency Vortexa. 

This expansion aligns with more competitive pricing and early signals suggesting a softer seasonal rise in domestic consumption than typically observed.

Saudi Arabia's crude and condensate exports have remained within a narrow range since July 2024, indicating strong compliance with the production quotas set by the Organization of the Petroleum Exporting Countries and allies. 

May export quota to rise

With the anticipated 411,000 barrels per day production unwind in Saudi Arabia this May, their effective production quota will increase by 160,000 barrels a day compared to April.

“This is likely to pave the way for higher exports in May,” Jay Maroo, head of market intelligence & analytics - Middle East and North Africa at Vortexa, said in a report. 

Vortexa data indicates Saudi crude/condensate exports remained relatively steady at approximately 6 million barrels per day from March through the first 20 days of April.

January-February exports exceeded the historical average by approximately 350,000 barrels per day, according to the data. 

This increase occurred while Saudi Aramco's 400,000 barrels per day Jizan refinery was undergoing scheduled maintenance.

Maroo said:

Pricing

Pricing appears to be heading upward, particularly for exports.

In early April, Saudi Arabia revealed its official selling prices (OSPs) for crude oil cargoes loading in May. These prices were notably lower than what the market had anticipated.

The May OSP for Arab Light crude in the Asia Pacific market has fallen sharply month-over-month to a premium of just $1.20 per barrel over the average of Oman and Dubai prices, marking the largest such decline in several years.

“The sharp discount to Saudi crude for May loading, in particular for the Asian market, is likely to facilitate exports to key markets in the region, including China, where Saudi has recently been losing market share,” Maroo added. 

Lower domestic demand

Saudi Arabia's domestic demand for power generation during the summer surge is met using its own crude oil and both domestically produced and imported residual fuel oils.

Crude/DPP (delivered duty paid) arrivals at key Saudi power-generation sites indicate a sluggish start to the seasonal increase, which has not yet reached its peak.

April's initial 20-day arrival figures are lower than usual, consistent with below-average numbers in preceding months this year, Vortexa data showed.

Last week, Rystad Energy had said that Saudi Arabia aims to diversify the nation’s energy mix and increase gas production by 60% from 2021 levels.

By tapping into unconventional gas, Saudi Arabia stands to displace up to 350,000 barrels per day of crude burn for power generation by 2030, according to the Norway-based energy consultancy.

Additional barrels available for exports

Considering a rough estimate of a 100,000-150,000 barrels per day shortfall in domestic demand, coupled with an increased production allowance of 160,000 barrels a day, there is a potential for an additional 300,000 barrels per day in exports for May, according to Vortexa.

“This volume could also be boosted by crude supplies freed up from domestic refining as a result of a 60-day turnaround underway this month at the 400kbd Petro Rabigh refinery,” Maroo said. 

“Looking ahead, the question is how much longer Saudi Arabia, and OPEC+ more generally, will increase production quotas and exports for the global market.”

OPEC’s members meet again on May 5 to determine June production levels.

Alternatively, the group might choose to keep increasing market supply. 

In this scenario, Saudi Arabia anticipates expanding its market share as other producers adhere to their agreed compensation strategies, Maroo said.