With A Substantial Global Market Surplus: Saudi-Owned Aramco Halts Plans to Increase Daily Oil Output
Aramco, as the world’s biggest oil exporter, says that its output per day won’t exceed 12 million barrels. This comes after Aramco’s announcement several years ago to increase its capacity to 13 million barrels by 2027.
The company alone accounts for about 10% of the 100 million barrels of oil the world consumes every day.
On Tuesday, January 30th, the Saudi-run oil company ‘Aramco’ said it would minimize its production per day from 13 million barrels to 12, as requested by the Ministry of Energy.
Neither the government nor Aramco commented further on the abrupt decision, but the initial assumption is that Saudi is rethinking oil supply and demand. Especially after the US oil expansion, maybe the world doesn’t need that much Saudi oil after all?
The New York Times, which carried the news among other media outlets, quoted a financial analyst at Bernstein company, Neil Beveridge, “The decision probably reflects a view that the world does not need as much Saudi oil as was previously expected.”
However, such a drop in oil production could cause suspicion, especially amid the geo-political disruption in the region.
According to the Financial Times, Amrita Sen, the Head of Research at Energy Aspects, said, “The decision is absolutely not about what they think of demand…they have 3 million barrels per day of spare capacity now, so what is the rush of increasing production capacity to 13 million barrel per day.”
This means that the daily pumped-up capacity is 9 million barrels per day.
Saudi and Russia have also led efforts with other allies in the intergovernmental Organization of the Petroleum Exporting Countries (OPEC+) to cut oil output. This aims to balance markets in the face of rising supply from other major oil producers, like the U.S.
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