The Polish oil contract gives Aramco a foothold in Russia’s backyard

RIYADH, SAUDI ARABIA (Parliament Politics Magazine): The largest oil company in the world, Aramco, will purchase a 30% stake in a Baltic refinery along with a wholesale fuel unit.

Saudi Aramco’s agrees to supply nearly half of Poland’s oil. This agreement will strengthen the world’s largest crude exporter’s position in an area, long dominated by Russian producers.

It also struck a long-term delivery agreement with PKN Orlen SA, a Polish refiner.

The company owned by the Saudi government will increase oil sales in Russia’s energy backyard at a time when the two countries, which are joint leaders of the OPEC+ producer alliance, are working to relax about two years’ production limits that began with the outbreak Covid.

The crude may be used in Lithuanian refineries as well as those in the Czech Republic by Orlen thus the transaction could have ramifications beyond Poland. Many plants in Eastern Europe were built to operate on the Urals grade of Russia, and using alternative barrels may necessitate technical adjustments. Saudi and Iraqi crude  are in regular competition with Russian barrels for clients.

Bloomberg Intelligence analysts Salih Yilmaz and Rob Barnett said in a research note, that this purchase of Aramco’s purchase will “broaden the presence of the company in Europe’s refining system with a share in a recently refurbished facility.” In addition to that, it will help Aramco “strengthen its position in an area where Russian crude has traditionally dominated.”

Competition is fierce.

After the pandemic prompted countries to shut down businesses, restricting demand, the 23-member OPEC+ alliance has cut supply since 2020 to maintain oil markets. Now that the economy is improving and oil is trading at $80 per barrel, the OPEC is gradually reversing its cuts and delivering more oil back to market.

Even while they work with each other to limit supply, competition for consumers remains fierce among the world’s biggest producers. Russia exports oil to Asia through pipeline, where it comes in competition with Saudi barrels in the largest market for Aramco.

The daily flotilla of crude departing Saudi Arabia for international markets includes only a modest percentage of sales to Europe. According to Bloomberg data, petroleum shipments to China account for approximately a fourth of the kingdom’s everyday crude sales of almost 7 million barrels.