There is an increasing likelihood that Saudi Arabia could increase its petroleum exports (crude and refined) by 0.5mb/d to 1mb/d from H2 15 to 2016 to maximize market share and revenues in a low-price environment, as per a report by Barclays.This factors in the new reality of US shale being a possible source of swing supply , albeit one much slower to react than the kingdom, Barclays said.

Saudi Arabia has signaled that it is moving away from its traditional role as swing supplier of crude, relaying the role to more expensive non-OPEC suppliers. As the kingdom focuses on market share, it still has the potential to become one of the most flexible suppliers of petroleum, the report said.

The kingdom is increasing the level of refined products it exports to the market, relative to crude oil. By building local refineries and increasing stakes in refineries globally (South Korea, China, US), Saudi Arabia has a growing captive market for its crude. It is uniquely positioned relative to other oil producers in a highly competitive market.

Being among the world’s lowest-cost oil producers, Saudi Arabia can adjust feedstock prices for its local and captive refineries to provide ultra-competitive refined products, as well as competitive crude on term barrels to lock in market share in an environment of increased oil market volatility.

“Rather than holding on to large levels of spare capacity, the kingdom could choose to reduce the level of spare it maintains, sharing the role of spare capacity provider with US shale supply,” Barclays said.
Source: Barclays