Shrink in oil demand could mean Saudi power play backfires

Saudi Arabia has booked as many as 25 supertankers and provisionally chartered another 15 vessels, to send oil to new and old customers in order to undercut Russia, according to shipping industry sources. Together the ships can carry 80 million barrels of oil – almost equivalent to a day of global demand.

The armada of ships will flood the market with additional oil, but freight costs will be so high as a result that refiners may be reluctant to take the shipments.

The result of this could be tens of millions of barrels in ships at anchor at a time when oil demand and international prices have lost more than half their value compared with the start of the year.

The rush for ships sent tanker rates soaring, prompting Saudi Arabia to tell its buyers it would abandon its usual policy of providing compensation for freight jumps, which will make its deep discounts less attractive.

Several European majors and refiners are currently engaged in talks with Aramco to try to cut April crude purchases, four trading sources told Reuters. They asked not to be identified because of the sensitivity of the issue.

For more information visit www.saudiaramco.com

30th March 2020