Saudi Aramco’s international bond prospectus removed a layer of secrecy that has long shrouded the world’s largest oil company.
The 469-page document detailed Aramco’s revenue, profits, oilfield reserves and breakeven costs, all of which underscored the oil giant’s staggering size and efficiency.
What I was interested in was something else. Did Aramco reveal any information on its crude inventories?
Not a headline-making topic, but a highly relevant one for us at Ursa because we measure Saudi crude stocks every week using satellite imagery. How would our data compare?
This was also a moment of truth for Saudi Arabia.
The only publicly available source for Saudi Arabia’s crude inventories was a self-reported figure published every month since 2002 by the Joint Organisations Data Initiative (JODI).
Not everyone trusts those numbers, however. That reputation isn’t specific to Saudi data.
“The main problem with JODI is inventories,” someone said a recent seminar we attended. “Stock data is treated as a balancing item.”
For each country, JODI data contains a breakdown of supply (production, imports), demand (exports, refinery intake, power plant use) and inventory change.
The whole equation should balance. The difference between supply and demand is the inventory change. And if supply equals demand, then inventories are flat.
In the case of Saudi Arabia, supply has apparently been less than demand almost every month since 2015, causing inventories to decline, according to JODI data.
The graph below shows this trend:
Source: JODI via MarketView
It’s very unusual for stocks to move in one direction for so long.
If this data is to be trusted, then it means Saudi production has generally fallen short of demand (domestic + exports) for the last four years.
That paints a bullish picture of the oil market that went unchallenged until recently when Saudi inventories could be measured directly using satellite imagery.
Our data showed Saudi crude stocks in December 2018 averaged 5.5% more than December 2017. JODI data showed a 16% draw for the same period.
The Aramco prospectus, which contains information on Saudi crude inventory changes on an annual basis from 2016-18, serves as another counterpoint to JODI data.
The table below shows a comparison of the data by source:
The biggest discrepancy was 2016 when JODI data overstated exports and understated production relative to the Aramco prospectus.
One area in which the prospectus failed to shed light was total inventories, only reporting the year-on-year changes.
That's too bad because another enigma surrounding Saudi JODI data has been total inventory level, which is larger than our estimate of total capacity in-country.
Our data includes the two largest sites, Ras Tanura and Yanbu.
Illustration: Christina Wessel/Ursa
One reason why the level of Saudi stocks, as reported by JODI, would be higher is the inclusion of storage held abroad.
It’s not a secret that Aramco owns and leases storage outside of Saudi Arabia.
Four locations listed by the prospectus as “strategic international delivery points” were Rotterdam, Sidi Kirir, Okinawa and Fujairah.
Yet even including those sites wouldn’t explain the difference. Do you believe JODI data is accurate?