July 14, 2024
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OIL & GAS

OPEC Secretary General Clarifies Saudi Arabia’s Decision to Postpone Oil Capacity Expansion

OPEC’s Secretary General, Haitham Al Ghais, clarified that Saudi Arabia’s decision to postpone its oil capacity expansion plans should not be seen as an indication of declining crude demand.

“First of all I want to be clear I cannot comment on a Saudi decision … but this is in no way to be misconstrued as a view that demand is falling,” Haitham Al Ghais told Reuters in Dubai on the sidelines of the World Governments Summit taking place in Dubai.

The Saudi government on Jan. 30 ordered state oil company Aramco, to lower its target for maximum sustained production capacity to 12 million barrels per day (bpd), 1 million bpd below a target announced in 2020 and set to be reached in 2027.

ALSO READ: Saudi Orders Aramco to Stop Plans to Increase Production Capacity

Reuters reports that the kingdom’s directive to lower the production target “was at least six months in the making and based on an assessment that much of Saudi Arabia’s excess capacity was not being monetized.”

As the world’s largest oil exporter and the de facto leader of OPEC, Saudi Arabia’s decisions carry significant weight in global oil markets.

OPEC’s annual outlook, published in October, projected an increase in world oil demand to reach 116 million barrels a day (bpd) by 2045.

This growth is expected to be driven by countries such as China, India, other Asian nations, Africa, and the Middle East.

Al Ghais reaffirmed OPEC’s confidence in its outlook, stating that the organization stands by the robustness of its forecasts. While the 2024 edition of the outlook is scheduled for release later this year, Al Ghais indicated that any potential revisions to the numbers would only be known in September or October.

“But we believe now our numbers stand and are very solid numbers,” he said.

“If anything, changing narratives we are seeing now … a lot of countries in the world turning back and slowing down and rethinking their net zero goals … that will create further long-term demand for oil.”

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