The Saudi Energy Minister announced that the country is looking to increase its oil export capacity to 10 million barrels per day (b/d), which represents a significant increase from the current capacity of 7 million barrels per day. This capacity increase is a result of converting a gas pipeline to oil and also investing in loading capabilities at ports.
Details of the Oil Export Capacity Increase
According to the Saudi Energy Minister, of the total 10 million barrels per day, about 1.2 million barrels per day will be supplied by converting a gas pipeline to oil, and this new capacity could be ready for operation within the next 7 to 8 weeks. However, further capacity increases may require more time, likely taking up to three years. Additionally, to transport more cargo from the Red Sea, further investments in loading capacity at ports are also needed.
Impacts of Middle East Developments on the Oil Market
Recent developments in the Middle East, including Houthi attacks on Saudi Arabia and ongoing risks to oil flow from the Gulf, have raised significant concerns in the oil market. Meanwhile, the oil market has generally experienced price increases in response to these developments. Notably, Brent crude rose by 1.8 percent yesterday, reaching nearly $107 per barrel, the highest price since mid-September.
Meanwhile, oil production in the Gulf of Mexico has decreased due to storm activity, with approximately 605,000 barrels per day of U.S. oil production halted, equivalent to nearly 30 percent of total production in the region. However, production has been gradually improving in recent days.
Impacts on the European Natural Gas Market
The European natural gas market is also witnessing rising prices, with TTF futures for this month exceeding €84 per megawatt hour. Currently, the market is facing the reality that much of the Northern Hemisphere may experience a shortage of liquefied natural gas from the Gulf during the winter. This could increase competition between Asian and European buyers throughout the winter and expose the market to higher price volatility. Additionally, some EU member states are taking measures to purchase gas compulsorily to meet storage targets.
According to the latest statistics, gas storage in the European Union is currently 75 percent full, which is less than 83 percent at the same time last year and also below the 5-year average of 89 percent.
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