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This decline, at the request of the Saudi government and without much comment, likely reflects a more subdued outlook for Saudi oil demand.
By Stanley Reed
Saudi Aramco announced on Tuesday that it would cancel plans to increase its oil production, a remarkable 180-degree turn by one of the world’s most sensible oil producers.
Aramco, Saudi Arabia’s national oil company, said it had been ordered by the Riyadh government to reach its “maximum sustainable capacity” of crude oil production at 12 million barrels per day, and refrained from expanding it to 13 million barrels per day. 2027, a plan announced several years ago.
The oil giant did not provide a reason for the pullback. But it could be a sign that the Saudis are changing their thinking about future supply and demand for their oil. Global oil supplies have recently been stronger than the Saudis may have anticipated because of strong growth in output from shale drilling in the United States, which is now the world’s leading oil producer, and other sources. At the same time, some analysts expect demand to level out in the coming decade.
“This resolution probably reflects the view that the world doesn’t want as much Saudi oil as expected in the past,” said Neil Beveridge, an analyst at Bernstein, a research firm.
The government would possibly need to lose money to spend on Crown Prince Mohammed bin Salman’s ambitious plans for progress, as well as on select energy resources such as vegetable fuel and hydrogen. Aramco said it had obtained orders from the Energy Ministry, headed by Prince Abdulaziz bin Salman. , the crown prince’s older half-brother, to curb its expansion.
Reducing capacity in the long term at a time of emerging tensions in the Middle East may simply raise concerns, but the Saudi resolution means there will be a decline in oil volumes in the short and long term, analysts say. Right now, Aramco is generating about 3 million barrels a day less than it can.
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