Saudi Arabia discovers more oil and gas reserves as Brent gains on weather worries

Saudi Arabia announced the discovery of seven oil and gas fields in the kingdom’s Eastern Province and Empty Quarter as crude oil prices continued to rise this week on expectations of strong demand and worries about weather disruptions.

State energy company Saudi Aramco has discovered “two unconventional fields, one Arab light oil reservoir, two natural gas fields and two natural gas reservoirs,” state news agency SPA reported on Monday, citing Energy Minister Prince Abdulaziz bin Salman.

The Al-Ladam unconventional oil field, located in the Eastern Region, was discovered after an exploratory well produced oil at a rate of 5,100 barrels per day, along with about 4.9 million standard cubic meters of gas daily.

The Al-Farouk unconventional oil field, also in the Eastern Province, was identified following the flow of Arab ultralight oil from the Al-Farouk-4 well, producing 4,557 bpd of oil along with approximately 3.79 million standard cubic meters of gas per day.

Meanwhile, at the Unaizah B/C reservoir, located in the Mazalej area, the Mazalej-62 well began producing light Arabian oil at a rate of 1,780 bpd.

Two natural gas fields and two reservoirs have also been discovered in the Empty Quarter, a large desert expanse covering the southeastern part of the country.

The announcement comes as Saudi Arabia, which has the world’s second-largest crude oil reserves after Venezuela, plans to increase crude production capacity to 12.3 million bpd by 2028.

Earlier this year, the kingdom, the world’s largest oil exporter, abandoned plans to increase capacity to 13 million bpd by 2027, a decision later attributed to the ongoing energy transition by Saudi Arabia’s energy minister.

Like other oil-producing countries in the Middle East, Saudi Arabia benefited from a surge in crude oil prices following Russia’s invasion of Ukraine in 2022.

Oil prices have risen about 13 percent this year on the back of supply cuts by OPEC+, an alliance led by Russia and Saudi Arabia, as well as geopolitical tensions in the Middle East.

Oil hits two-month high

Meanwhile, oil prices also extended gains on Tuesday, trading at a two-month high on expectations of rising US fuel demand and concerns over potential disruption from a hurricane.

Brent, the benchmark for two-thirds of the world’s oil, was trading 0.84 percent higher at $87.33 a barrel at 1:51 p.m. UAE time. West Texas Intermediate, the benchmark that tracks U.S. crude, rose 0.88 percent to $84.11 a barrel.

On Monday, Brent settled 1.88% higher at $86.60 a barrel, while WTI closed up 2.26% at $83.38 a barrel.

Fuel demand is expected to get a boost from the US Independence Day holiday period.

The American Automobile Association estimated a record 70.9 million riders for the week of July 4, representing a 5 percent year-over-year increase and an 8 percent increase over 2019 levels.

Hurricane Beryl, a Category 5 storm that has lashed several islands in the southeastern Caribbean, could disrupt operations in the Gulf of Mexico region, which accounts for about 15 percent of total U.S. oil and gas production.

“Hurricane Beryl will not have an immediate impact on operations in the Gulf of Mexico, but could cause disruption later in the week,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Risks remain tilted to the upside, the next target for bulls is $85 a barrel (for WTI), where we should see support and a rebound given that weak US and Chinese production data from earlier in the week do not provide another support,” she added.

Oil prices rose about 5 percent in June as OPEC+ production cuts kept supply in check and summer travel increased in the Northern Hemisphere.

Brent’s recovery from a June 4 low of $77.5 a barrel “represents a correction of the steep – and in our view, largely unwarranted – sell-off following the latest OPEC+ announcement,” research arm BMI said of Fitch.

“However, firmer fundamentals also played a role. Global oil demand rises seasonally in the summer months, and key exporters – particularly in Mena – are forced to reduce their exports to meet higher domestic consumption,” BMI added.

Futures fell after the alliance of producers met last month with a plan to phase out voluntary curbs of 2.2 million barrels per day starting in October 2024 and continuing monthly through September 2025.

This comes as global oil demand is forecast to be 3.2 million bpd higher in 2030 compared to 2023 due to increased oil consumption in emerging Asian economies, the International Energy Agency said last month.

The increase is mainly due to higher oil use in India and increased demand for jet fuel and petrochemical feedstocks, particularly in China.

Meanwhile, total supply capacity is expected to rise to nearly 114 million bpd by 2030, outstripping estimated global demand by 8 million bpd, the Paris-based agency said.

Updated: 02 July 2024, 11:22