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Oil cuts take $11bn bite out of Saudi exports

Weak global growth in 2024 could prompt further Opec+ cuts if the oil market shifts decisively into surplus, said Fitch Ratings Aramco
Weak global growth in 2024 could prompt further Opec+ cuts if the oil market shifts decisively into surplus, said Fitch Ratings
  • Saudi total exports for the year to May 2023 fell 32%
  • The statistics authority blames a SAR 43.5bn drop in oil exports
  • Opec+ is reducing output until next year and Saudi at least until August

Saudi Arabia’s decision to scale back oil production cut the kingdom’s total exports in the last year by $11 billion, according to data published on Tuesday by the General Authority for Statistics.

Overall merchandise exports from Saudi Arabia amounted to SAR 97.1 billion ($25.89 billion) in May 2023, down 32.1 percent year on year.

The majority of this was a result of oil exports amounting to SAR 72.0 billion, down SAR 43.5 billion, or 37.7 percent, compared with May last year.

Oil made up 74.1 percent of total Saudi exports in May 2023, down from 80.8 percent in May 2022. 

Non-oil exports – including re-exports, which rose 50 percent – decreased by 8.7 percent to SAR 25.1 billion in the last year.

China was the kingdom’s top export market, receiving 17.4 percent of the total. In June it signed 30 investment agreements worth SAR 37.5 billion during the first day of the Arab-China Business Conference in Riyadh

Second was India with 9.4 percent, followed by Japan (8.3 percent), South Korea, the UAE, the US, the Netherlands, Bahrain, Singapore and Taiwan.

Total merchandise imports rose 20.9 percent to SAR 67.7 billion in May 2023, meaning the kingdom had a total trade surplus of SAR 29.4 billion, or 30 percent, in May.

The oil price hovered near a three-month high of $80 on Tuesday. Brent futures were unchanged at $82.74 a barrel by 1207 GMT, while US West Texas Intermediate (WTI) crude was up 1 cent, or 0.01 percent, at $78.75, according to Reuters.

Opec+ – the Organization of the Petroleum Exporting Countries plus allies led by Russia – accounts for around 40 percent of the world’s crude production and the group has been limiting supply since late 2022.

At its most recent meeting last month, the group agreed to limit supply into next year, while Saudi Arabia pledged to extend its voluntary production cut into August. The next Opec+ policy meeting will be held in November, while an online ministerial review is scheduled for August 4.

Slowing oil activity is hampering growth for Saudi Arabia. Real GDP grew by 3.8 percent year on year in the first quarter of 2023, down from 5.5 percent in the previous quarter and 10 percent in the first quarter of 2022. 

An analysis by Jadwa Investment last month highlighted that oil was the main drag on GDP. Growth in oil activities stood at just 1.4 percent in the first quarter, down from 6.1 percent in the previous quarter and 20.2 percent in the first quarter of 2022. 

James Reeve, chief economist at Jadwa, wrote in a research note: “Oil activities are set to slow further, and indeed go into reverse given the kingdom’s commitment to additional cuts in production as part of Opec agreements.”

Barring an unexpected recovery in output in the fourth quarter, total crude output is likely to be 8-10 percent lower in 2023 than in 2022, he added.

Jadwa said the biggest non-oil growth driver was manufacturing, which is dominated by petrochemicals and oil refining. Both activities had a difficult first quarter.

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