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Aramco turning to oil trader- Here’s why

The biggest oil company in the company wants to take on the biggest oil traders, according to the Financial Times (FT).

What’s the motive?

Trading with the majors

Saudi Aramco strives to be ‘top three’ oil trader as part of a broader strategy to make the company more resilient to market downturns, according to FT.  

The company is targeting trading about 6m barrels a day of crude and refined products.

It is going to challenge such players as BP, Royal Dutch Shell, Trafigura and Vitol.

Vitol is the world’s largest independent trader.

Amin Nasser, chief executive of Aramco, said in an interview at Saudi Aramco’s London office: “Over the next three years, we should be one of the top three traders. We are increasing year on year.”

He said he saw a potential for Saudi to trade its own crude, which until now has been sold to customers in direct long-term contracts, similar to what ExxonMobil did in recent years who saw that record profits could be made even in a downturn.

“Trading activities have also helped BP and Shell compensate for lower revenues from their own production,” said FT.

Khalid al-Falih, Saudi Arabia’s energy minister and chairman of Saudi Aramco, told the FT this month that the company would also seek to take its exploration and production expertise abroad such as in the US, Russia and Australia.

Supply/Price worries

Saudi Aramco’s CEO reportedly warned about the possibility of a supply gap in the years ahead due to under-investment in oil and gas, according to At the International Petroleum Week conference in London, he said that U.S. shale would not be able to cover the supply shortfall while electric vehicles would disappoint. “I can assure you there will be an impact,” he said.

 President Trump’s tweets calling on OPEC to lower oil prices may have triggered a price decline on Monday, said.

“His comment that the world is too fragile to take the rising prices is likely to have contributed to the price slump,” Commerzbank wrote in a note.

 “OPEC is pretty much caught between a rock and a hard place: either it cuts production as agreed, or even more sharply, thereby risking provoking the anger of the US president. Or it allows the oil price to fall back below $60 per barrel given that non-OPEC production, especially in the US, is on the rise.”
President Trump cited significant progress in his decision to delay the implementation of tariffs on Chinese goods which removes, for the time being, one of the greatest bearish factors facing the oil market.