Saudi Arabia has been slashing oil exports to the United States over the past two months, in what looks like a move to force a reduction in the world’s most transparently reported inventories that could put the Saudis on a collision course with U.S. President Donald Trump, who has repeatedly said that oil prices should be much lower.
The Saudis started to reduce shipments to the United States in September, and this month they are loading around 600,000 bpd on cargoes en route to the United States, down from more than 1 million bpd in July and August for example, CNBC reports, quoting figures from ClipperData.
According to ClipperData estimates, Saudi oil exports to the United States could soon reach their lowest levels on record.
The Saudi tactic to send reduced volumes to the States—which regularly reports every week crude oil inventories—succeeded last year.
Reduced Saudi oil imports tend to reflect in lower weekly U.S. inventories, while in the past weeks, crude builds have been weighing on oil prices, together with fears of an oversupplied global market and signs of slowing economic and oil demand growth.
“It worked so well in 2017 for [the Saudis] to cut flows to the U.S. because people could see the inventories dropping because U.S. data is so timely and transparent,” Matt Smith, head of commodities research at ClipperData, told CNBC.
Due to seasonally lower demand, Saudi Arabia will reduce its supply to the global markets by 500,000 bpd in December compared to November, Energy Minister Khalid al-Falih said this weekend. On Monday, al-Falih affirmed that OPEC will do ‘whatever it takes’ to balance the market, admitting that the cartel’s analysis shows that another cut of 1 million bpd may be required.
The comments from Saudi Arabia sent oil prices up early on Monday, before President Trump’s latest tweet aimed at OPEC—“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”—contributed to a 7-percent oil price plunge on Tuesday.