Saudi Arabia will produce a record high 13 million barrels per day (bpd) in April up from 9.7 million bpd in March. This represents a huge increase in a very short space of time. It is important to consider that these are production numbers — not inventories. Such inventories have helped the Kingdom to continue supplying its customers even after the Sept. 14 attacks on the largest processing facility in the world in Abqaiq. At the end of 2019 and even before the impact of the coronavirus on oil demand and prices, US shale producers cut spending for the second year in a row. That raises questions about shale’s medium to long-term resilience as it struggles with sustaining the key WTI breakeven point of $50 per barrel. Though US shale oil producers have been producing at will and capturing market share out of OPEC+ output curtailment, they have failed to capture further market share through contractual volumes because their growth has not been sustainable. Most of this shale oil is being sold in the spot market, which must be a worry for US producers as oil stumbles to below $30. Looking east to Russia, Moscow must now bear the consequences of its desire for a free oil market. While Russia’s oil industry may not seem as vulnerable to low prices as the US shale producers, its broader economy does depend very heavily on hydrocarbons. Oil and gas accounts for more than 60 percent of Russian exports and more than 30 percent of Russian GDP. Not only is the country one of the top oil producers in the world, it is also the second largest producer of natural gas and the major supplier of gas to Europe. The market is now in "contango", where oil for delivery in future months is worth more than that destined for immediate delivery. Faisal Faeq Natural gas is strongly correlated with the crude oil market. Natural gas export prices in Russia are linked to crude oil prices. Hence Russia is more concerned about sustainable oil prices than other OPEC+ members. Both US shale and a large proportion of Russian crude is sold on the spot market at the mercy of traders and brokers. However, Saudi Aramco sells its crude oil grades under long-term contractual agreements. Accordingly, record high export volumes amounting to 13 million bpd have been already secured by Saudi Aramco customers. Even if the demand is weak, it is intuitive that refiners will try to take advantage of lower oil prices and buy more crude for storage at such historically low prices and try to maximize their purchases once their storage capacity permits. Another important factor is the market is now in "contango", where oil for delivery in future months is worth more than that destined for immediate delivery. Saudi Arabia produces the lowest cost crude oil barrel. It is simply not true that the Kingdom requires oil to be at least $80 to balance its budget. On the contrary, Saudi Arabia has increased its non-oil income to 31 percent lately. Ongoing economic reforms under Saudi Vision 2030 will ensure the Kingdom relies less and less on the oil price to balance its budget. Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view