An offshore oil rig stands in shallow waters off the Manifa Offshore Oil Field, operated by Saudi Aramco, in Manifa, Saudi Arabia.
Simon Dawson | Bloomberg | Getty Images
The pinnacle of the world’s largest oil company said he was concerned about global oil supplies.
Current market dynamics – such as China’s slowdown and the aviation sector still recovering from the Covid-19 pandemic – are keeping demand relatively low, but that is ready to alter soon. Saudi Aramco CEO Amin Nasser is worried that the world won’t have enough spare capability to deal with this variation.
“In terms of oil, we’re in a situation where there’s spare capability that is helping to mitigate the outages,” Nasser Hadley Gamble of CNBC told CNBC. “Nonetheless, I’m undecided concerning the medium to long run because as spare capability shrinks, we can’t find a way to mitigate any short or long run interruptions just like the Russia-Ukraine crisis.”
Aramco pumps roughly 10% of the world’s crude oil. It has a maximum pumping capability of 12 million barrels of oil a day, Nasser said, and is working to extend that by one other million barrels a day. Still, he says: “We should always be concerned within the medium to long run. I believe it can be an issue to satisfy the growing demand.”
The International Energy Agency’s latest oil market report, released on Wednesday, predicts that global oil demand will increase by 1.9 million barrels a day in 2023, reaching a record 101.7 million barrels a day – almost half of which is able to come from from China. Meanwhile, the agency expects oil supply growth to slow to 1 million barrels a day over the identical period.
While Aramco is working to construct additional capability, “I do not think it can be a sufficient investment to supply the extra capability that can be needed to supply the market,” Nasser said. “It’s going to not ease the situation where demand is rising and compensating for the autumn. You wish additional investment elsewhere, world wide, to satisfy global demand.”
Investment in hydrocarbons has declined amid the give attention to decarbonisation, and government regulations in lots of countries discourage the exploration and drilling of fossil fuels. Saudi Arabia and lots of of its partners within the OPEC producer alliance have repeatedly called for simultaneous investments in hydrocarbons and energy transition to avoid future supply cuts.
The upcoming dynamics of supply and demand may raise prices. Maarten Wetselaar, chief executive of Spanish oil company Cepsa, predicted on Wednesday that the value of crude oil would return to triple digits within the second half of 2023. First-month Ice Brent crude oil futures traded at noon in London at near $87.36 per barrel.
“Think of it this manner,” Nasser said. “Today we’ve about 2 million barrels of spare capability. The aviation industry is 1 million barrels below pre-Covid levels. [the] If the aviation industry picks up in 2023-24, that is an additional million barrels. [Consider] China will open up, and that can really boost demand rather a lot.”
He stressed: “So all these indicators now, no recession looming – if economies start to choose up and improve, that may even require additional supply. So you would like additional investment to arrange for what’s coming.”