Saudi Arabia’s head-scratching oil production move

by Ben Geman at

There’s no real consensus about why Saudi Arabia ditched plans to raise its max oil pumping capacity — a decision the kingdom has not explained.

Why it matters: State oil giant Aramco‘s announcement comes amid uncertainty about long-term demand growth, and as nations double down on fighting climate change.

Catch up fast: Aramco on Tuesday scrapped plans to lift “maximum sustainable capacity” to 13 million barrels per day (mbd) by 2027, up from 12.

What they’re saying: Some in the energy market’s analyst hive-mind see a tacit concession that long-term consumption increases won’t match the Saudi’s bullish public stance.

  • For instance, a Morgan Stanley note says it could show a “government expectation that demand for its oil will no longer rise as strongly as previously expected,” Reuters reports.

Yes, but: “We think the decision is likely primarily a function of a more resilient supply outlook rather than a change in view on demand,” Barclays’ Amarpreet Singh said in a note.

  • There’s lot of supply growth outside OPEC these days, with more barrels from the U.S. (the world’s largest producer), Brazil, Guyana and elsewhere.