Saudi Arabia's March oil revenue increased instead of decreasing.

The latest analysis in the industry has found that the blockade of the Strait of Hormuz and the subsequent surge in global oil prices have unexpectedly brought windfall profits to Saudi Arabia, the largest oil producing country in the Middle East, despite other countries lacking alternative transportation routes losing billions of dollars. Since the end of February, the conflict escalation caused by the US and Israel's airstrikes on Iran has effectively blocked the Strait of Hormuz - where about one-fifth of global oil and liquefied natural gas transportation passes through. Although Iran later stated that it would allow ships not affiliated with the US or Israel to pass through, some oil tankers can still navigate this narrow waterway, the energy market has still experienced unprecedented volatility. In March, international Brent crude oil prices rose by 60%, setting a record for monthly gains. Interestingly, while many regions around the world are facing inflation and economic losses due to rising energy prices, the impact on Middle Eastern oil-producing countries actually depends on their geographical location. Despite Iran controlling the Strait of Hormuz, Saudi Arabia, Oman, and the UAE can bypass the strait by using pipelines and ports to transport some oil. In contrast, Iraq, Kuwait, and Qatar, lacking alternative routes to the international market, have seen their oil exports stall. It is an undisputed fact that with the US, Israel, and Iran's conflict effectively blockading the Strait of Hormuz, most Gulf countries have indeed seen a decline in their crude oil and condensate exports. Industry estimates of the March export data show that Iraq and Kuwait experienced a staggering 75% decrease in estimated nominal oil export revenue year-on-year. However, on the other end of the spectrum, Iran's oil export revenue increased by 37%, Oman by 26%, and Saudi Arabia's oil revenue grew by 4.3%. Particularly noteworthy is the "unexpected increase" in Saudi Arabia's oil export revenue - industry estimates show that among the countries facing export restrictions through the Strait of Hormuz (excluding Iran, which actually controls the strait, and Oman, whose major ports are outside the strait), only Saudi Arabia achieved revenue growth in March, as rising oil prices offset the relatively small decrease in export volume and even boosted income growth. This estimate uses export volume data provided by the ship tracking company Kpler and, where available, combines it with JODI data, multiplied by the average price of Brent crude oil, and compared with the same period the previous year. To simplify calculations, Brent crude oil prices are used as a benchmark here, although many of the crude oils are actually priced against other Middle Eastern benchmark oils, which currently trade at a significant premium over Brent crude oil. The East-West Pipeline of Saudi Arabia is of great importance For Saudi Arabia, the growth in oil export revenue means that royalties and taxes from the state-owned oil giant Saudi Aramco, of which the government and its sovereign wealth fund hold the majority of shares, will increase. After investing heavily to diversify revenue and reduce dependency on oil, the current rise in oil prices is particularly beneficial to the country, with the East-West oil pipeline being the biggest hero in maintaining growth in oil revenue despite the strait's blockade. Saudi Arabia's largest oil pipeline, the East-West Pipeline, with a total length of 1200 kilometers, was built during the Iran-Iraq war in the 1980s to bypass the Strait of Hormuz. The pipeline connects the eastern oil fields to the Port of Yanbu on the Red Sea coast, currently running at full capacity with an expanded daily average of 7 million barrels of oil. On average, Saudi Arabia consumes about 2 million barrels per day domestically, with the remaining 5 million barrels per day used for exports. Shipping data shows that despite an attack on the Yanbu port hub on March 19, the loading volume at Yanbu port for the week of March 23 still reached nearly full capacity at 4.6 million barrels per day. Kpler and JODI data show that Saudi Arabia's total crude oil exports in March fell by 26% year-on-year to 4.39 million barrels per day. Nevertheless, the rise in oil prices increased the value of these exports by about $558 million compared to a year earlier. It is worth mentioning that the Saudi government foresightedly increased exports to their highest levels since April 2023 in February to prepare for potential US attacks on Iran. Overview of other Middle Eastern oil-producing countries: Iraq most affected? In other Middle Eastern oil-producing countries, the UAE, with a daily transportation capacity of 1.5 to 1.8 million barrels, has to some extent mitigated the impact of the strait blockade with the Habshan-Fujairah oil pipeline that bypasses the Strait of Hormuz. However, it is estimated that the country's oil export revenue in March decreased by $174 million year-on-year. Previously, the loading operations at the Fujairah port were suspended due to attacks. Among the Gulf oil-producing countries, Iraq experienced the largest drop in oil revenue in March - plummeting by 76% year-on-year to $1.73 billion. Kuwait followed closely with a 73% decline to $864 million. The Iraqi State Oil Marketing Organization (SOMO) stated on April 2nd that oil revenue in March was about $2 billion, close to the estimates mentioned above by industry insiders. However, there was some good news as an Iranian military spokesperson stated over the weekend that "brotherly country Iraq" is exempt from any restrictions imposed by Iran on the Strait of Hormuz, with these restrictions aimed only at "hostile countries." If the exemption is implemented, theoretically up to 3 million barrels per day of Iraqi oil shipments could be released. Adriana Alvarado, Vice President of Sovereign Ratings at Morningstar DBRS, stated that governments of Gulf countries have various ways to strengthen their finances, either by using financial reserves or entering financial markets to issue bonds. She added, "Except for Bahrain, Gulf countries have enough fiscal space to deal with the impact - government debt levels are moderate, below 45% of GDP." However, the long-term impact remains unclear. Some Western oil companies and political figures have lobbied for increased investments in fossil fuels to try to mitigate supply shocks, but some analysts believe that renewable energy is the best insurance. This article was originally published on "CaiLian Press" and authored by Xiao Xiang; GMTEight editorial by Feng Qiuyi.