Saudi Arabia has lost a significant amount of its market share since the start of collapse in global oil prices two years ago.
Customs data collected by the energy consultant group FGE, and reported on by the Financial Times, shows that despite the Saudi state producing oil at record levels, its exports have failed to keep pace with demand and other producers, resulting in a loss of its market share in key markets.
The new data shows that the state lost market share in nine out of 15 of its key markets, despite producing the commodity at near-record levels of 10 million barrels per day, while exporting roughly seven million barrels.
Despite the Saudi state producing oil at record levels, its exports have failed to keep pace with demand and other producers
The recent glut in oil prices, which started in 2014, is invariably blamed upon Saudi Arabia for two reasons: first, the state’s attempts to drown out rival producers by maintaining high production levels of production. Second, its efforts to defend its market share in the face of new challengers, thereby not playing its traditional role as swing producer and guarantor of world oil prices. However, the new data on Saudi Arabia’s loss of market share seems to show that the second, more likely scenario has not been as successful as critics may have assumed.
The Saudis have repeatedly said – for example, at the IHS CERAWeek energy conference in Texas – that they will not sacrifice their own market share for higher cost producers by cutting production and raising prices. The state has also been reluctant to raise prices through slashing production, out of fear that other producers would not follow suit – something that would leave the Saudis with a diminished market share.
Such strategic thinking has been the reasoning behind allowing oil prices to fall so low, creating a burgeoning fiscal gap for the Saudi state that has resulted in deep spending cuts on the lavish subsidies it affords it subjects. The Saudis are feeling the worst of both worlds: a contracting market share and a prolonged depression in oil prices.