As is well publicised, OPEC continues to cut supply alongside Russia and other compliant partners, to bolster the price of crude; Brent has recently been trading comfortably above $60 per barrel, a two year high. Nowhere is this more noticeable than in the US. The largest oil refinery in the states is situated at Port Arthur Texas and is, in fact, owned by Saudi Arabia’s Aramco. During October the US imported an average of just 525,000 barrels per day of Saudi crude, the lowest level since May 1987 down from around 1.5 million barrels a day just ten years ago. This is not due to a drop in demand but a wider move by Saudi-led OPEC and partners to drain supply and remove the glut of oil that had built up over many years, thus forcing prices higher. This has been going on for some months now, but Saudi - which fought so hard for a dominant market share in the US market - has dropped from being the US’ second largest supplier (after Canada) to fourth; behind Iraq and Mexico.
The US is the only market in the world that publishes oil inventories weekly and has been the target of Saudi to show their resolve in the OPEC output cut backs and to hold the agreement together. Saudi officials openly own up to the strategy and have reported that their oil exports to the US will fall further over the coming months. Rather like President Draghi ‘we will do whatever it takes’ statement the Saudis are showing the same resolve even though the risks of giving up market share in the world’s largest energy market may have a sting in the tail in years to come. It was only back in 2013 that Aramco spent $10 billion on the Port Arthur refinery expanding capacity, at the same time they also paid $2.2 billion to buy themselves out of a 50:50 joint venture at the site with Royal Dutch shell.
Years ago the Saudis utilised their oil to bolster relations with the US government. However, now they feel that the relationship with the Trump-administration is so strong that they really do not need the threat of oil supplies to maintain political influence. And with weekly independent data to reflect their strong resolve to other oil producing partners this appears to be ‘a very cunning plan’.