Oil consumption in Saudi Arabia, the world’s biggest crude exporter, is expanding at the slowest pace in at least six years as low energy prices hurt economic growth.
The kingdom’s demand for oil increased by an average of 24,000 barrels a day in the first five months of 2016, the slowest growth rate for that period since at least 2010, the first year for which data are available from the Joint Organisations Data Initiative in Riyadh. The International Energy Agency is now looking for a drop in demand in Saudi Arabia for all of 2016, after forecasting an increase earlier this year.
Consumption of gasoline, kerosene and other refined products contracted this year, slipping by 22,000 barrels a day in the first decline since at least 2002, when JODI began tracking data. JODI monthly data on total oil demand, which includes crude burned to generate electricity, dates back to 2009. Demand has been crimped after governments in the oil-rich region cut or removed fuel subsidies, BMI Research said in a July 27 report.
“If the oil slump continues into next year and governments are not in the position to use counter-cyclical fiscal measures to support the economy, we aren’t going to see a huge contribution to oil-consumption growth from the region,” Edward Bell, a commodities analyst at Dubai-based lender Emirates NBD PJSC, said in an interview.
Saudi Arabia has boosted output for years to sustain export income while also satisfying domestic demand. The kingdom’s consumption spikes between June and September when air-conditioning use peaks. Demand for refined fuels such as gasoline has doubled since 2003, according to JODI. Saudi Arabia, the United Arab Emirates, Qatar, Oman and Bahrain have reduced or eliminated fuel subsidies over the past year to limit government spending because of low oil prices. Brent crude, an international benchmark, has dropped 20 percent in the past year and traded at $42.46 a barrel on Friday compared with over $100 a barrel as recently as in 2014.
Gasoline demand in Oman grew 1 percent during the first four months of this year, far below the annual average growth rate of 9.6 percent over the past decade, according to BMI. “The slowing consumption in Oman causes concern that other countries that have enacted or plan to roll out subsidy reforms might see a greater impact than first anticipated,” it said in the report last week.
Saudi Arabia, the Middle East’s largest economy, was expected to contribute almost half of the 100,000 barrel-a-day increase in regional demand that the IEA forecast for this year. The Organization of Petroleum Exporting Countries expects the kingdom to contribute a comparable share of a projected 180,000 barrels a day in new consumption from the Middle East in 2017, the group said July 12 in its monthly report.
Slower economic growth is having a greater impact on energy demand in the region than subsidy removals, Bell said. Emirates NBD expects Saudi Arabia’s economy to grow less than 2 percent this year compared with 3.4 percent in 2015, a deceleration “that’s going to eat into demand for fuel,” Bell said. Energy use in the region is projected to grow, but at a slower pace.
“The Middle East is somewhat counter to all economic logic,” Bell said. “When we have an economic slowdown, energy demand never goes negative.”
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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