Today.Az » Business » British expert sheds light on impact of Aramco's pullback on global markets
31 January 2024 [08:30] - Today.Az

By Azernews

Qabil Ashirov

Saudi oil giant Aramco will not raise its crude oil production from 12 million barrels per day to 13 million.

According to the international media outlets, the world’s largest crude exporter had got order from the Saudi Energy Ministry to maintain its Maximum Sustainable Capacity (MSC) at current levels.

The reason behind the decision of the Ministry has not been revealed.

It is worth noting that Saudi Arabia is the largest oil exporter in the world and it has played a role of safety cushion for global supplies in case of major disruptions caused by conflict or natural disasters.

Many believe that Saudi Arabia deliberately pulled back from its goal to sustain global oil prices over $70. As is known, other oil producer countries such as the USA and Brazil are expanding their oil production.

The U.S. is producing record amounts of oil, with production hitting 13.2 million barrels a day. Brazil is also expanding production quickly, and drilling is increasing in Guyana and other countries, too.

If the kingdom increased its oil production in addition to other countries, price crashes could be expected.

On the other hand, keeping the prices over $70 negatively impacts the economy of oil-importing countries. So the world, witness the competition between oil producers and consumers.

The British journalist and expert on energy issues, Neil Watson, in a comment for Azernews, noted that the overwhelming impact on all oil-importing nations will be that the oil barrel price is kept artificially high, thereby exacerbating the existing cost of living crisis and overall inflation. Immediately after the announcement, the price of Brent crude rose 0.24 per cent to reach USD82.6 per barrel.

“Despite having received an earlier directive from the Saudi government to increase production capacity to 13 million barrels per day, the impacts of decarbonisation are beginning to show their effects. Although demand is still growing, the IEA revealed that the fourth quarter of 2023 saw global gains drop by almost 400kb/d and global gains during 2024 are predicted to halve to over 1.1mb/d. This is mainly due to the policies of European governments, particularly regarding encouragement towards the adoption of electric vehicles,” Neil Watson said.

The pundit pointed out that this situation will continue ad infinitum and probably heralds further production restrictions across the OPEC+ countries, for which Saudi Arabia, the biggest oil producer in the world, is the figurehead. He added that as demand for oil further reduces, every attempt will be taken to keep the barrel price high (above USD80).

As for Azerbaijan, Neil Watson noted that the country works on new energy sources, such as green energy, and tries to diversify its export by thriving its non-oil export.

“It is acknowledged that there is no shortage of oil in Azerbaijan - new resources keep being found. The issue is that there is reducing justification for exploiting these. Instead, SOCAR and its partners are correct to focus on the Southern Gas Corridor and gas production as a whole, as this is a transitional fuel for which there is a great demand. But also it mostly focus on its renewable wave, wind and solar energy and seriously look at exploiting and developing its non-oil economy,” N. Watson concluded.

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