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Saudi Arabia’s oil shipments are on track to hit their highest level in almost three years amid heightened tensions between Washington and Tehran. Increased oil production is part of a contingency plan to limit disruptions to energy markets (and Saudi revenues) in the event of a US attack on Iran, Reuters reported.
The kingdom has long used its ability to quickly lift oil output as a way to calm markets worried about supply disruptions. It also helps the country demonstrate its usefulness as a US ally. Crude shipments hit 7.3 million barrels a day in the first 24 days of February, according to Bloomberg analysis. The UAE is adopting similar tactics, with its production expected to hit record levels this month. A seasonal dip in domestic oil consumption for power generation is also freeing up more crude for export.
Saudi Arabia, the world’s biggest oil exporter, is also hiring more supertankers to handle higher volumes. Crude prices have spiked over the past few weeks, rising above $70 a barrel as traders worry about the buildup of a large US military force in the region.
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Meanwhile, Saudi Aramco has started production at Jafurah, a giant shale gas field, moving it closer to its goal of becoming one of the world’s top 10 gas producers. Hitting its 2030 target to boost gas production by 80% could generate an additional $15 billion, free up crude for export by allowing for the replacement of oil-fired power stations, and help meet rising domestic demand.
Some analysts have said that Jafurah, which is expected to ultimately cost over $100 billion to develop, could also drive a significant increase in Aramco’s profits and help it diversify from a reliance on oil sales.The Saudi government still relies on oil for a majority of its revenues, via dividends from Aramco.