With nine local refineries boasting a combined capacity of 3.33 million barrels of oil per day (bpd), representing approximately 3% of global demand, Saudi Arabia is well-positioned to process its own crude. This domestic capacity is further complemented by an impressive 4.3 million bpd of refining capacity overseas, spanning operations in key markets like China, the United States, and Malaysia.
Recent data underscores this strategic shift. Saudi domestic refineries processed 2.94 million bpd in March, marking the highest volume ever recorded for that month and narrowly shy of the all-time high of 2.96 million bpd set in April 2024, according to the Joint Organizations Data Initiative (JODI). This 12% month-on-month increase in crude intake for refining in March was significantly higher than the 10-year average for the same period, exceeding it by 23%. This surge in refining activity correlates directly with a 12% month-on-month drop in Saudi crude exports to 5.75 million bpd in March, highlighting the kingdom's remarkable flexibility in choosing between direct crude sales and in-house processing.
While Saudi refinery rates likely saw a temporary dip of around 200,000 bpd in April due to planned maintenance, analysts like Keshav Lohiya, CEO and founder of Oilytics, anticipate elevated activity ahead of the peak summer demand season. Indeed, Saudi's refined product exports, which include high-value products like diesel, gasoline, jet fuel, and fuel oil, reached a record 1.58 million bpd in March, before a slight decline to 1.48 million bpd in April and 1.42 million bpd so far in May, likely reflecting scheduled refinery turnarounds.
Strategic Flexibility Amidst Market Shifts
This integrated refining strategy offers Saudi Aramco, the national oil company, a powerful mechanism to manage oil price volatility. Refining margins – the profit generated from converting crude oil into transportation fuels and chemicals – typically expand when feedstock (crude oil) prices decline. This makes refining a crucial hedge against falling crude prices.
This flexibility is set to become even more valuable as OPEC+, the alliance of major producing countries led by Riyadh, began to rapidly unwind 2.2 million bpd of output since April. This decision to inject a significant volume of oil into an already well-supplied market, coupled with concerns about the impact of potential U.S. President Donald Trump's tariffs on global economic activity, has exerted considerable downward pressure on oil prices, which have fallen to around $65 a barrel from a high of $82 in mid-January. With Saudi Arabia and its allies potentially deepening the price war by further accelerating production cuts at their upcoming meeting later this month, the refining sector's role becomes even more critical.
Despite the growing economic headwinds, refining margins have remained robust so far this year. They have benefited from lower crude prices and healthy demand for diesel, in particular. Benchmark Singapore refining margins are currently hovering near their highest levels since February 2024, around $8 a barrel, according to LSEG data.
Looking ahead, global fuel demand in the northern hemisphere typically experiences a seasonal peak from June through early September, driven by increased summer travel and higher air travel, which will likely continue to support refining margins in the coming months.
Saudi Aramco's annual report for 2024 indicates that the company allocated 28% of its crude oil production to domestic refining operations, an increase from 26% the previous year. Furthermore, it supplied 53% of the crude utilized by its joint venture refineries abroad, underscoring the deep integration of its upstream and downstream operations.
While the International Monetary Fund has estimated that Saudi Arabia requires an average Brent oil price of approximately $90 a barrel to balance its national budget, and crude prices are likely to remain at current levels or even lower for most of the year given the surge in supplies and demand uncertainty, the kingdom's expanded refining operations offer a potent tool to manage oil price volatility and better withstand a protracted price war. The record high in refined product exports observed in March 2025 further solidifies this strategic approach.