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DUBAI – Saudi Arabia’s decision to postpone oil capacity expansion plans should not be interpreted as an assessment that demand for crude is falling, OPEC’s Secretary General said on Tuesday.
“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.
The Saudi government on Jan. 30 ordered state oil company Aramco 2222.SE 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.
Sources have told Reuters the kingdom’s surprise reversal of its oil expansion plan was at least six months in the making and based on an assessment that much of Saudi Arabia’s excess capacity was not being monetised.
Saudi Arabia is the world’s largest oil exporter and de-facto leader of the Organization of Petroleum Exporting Countries.
OPEC raised its world oil demand forecasts for the medium and long term in its annual outlook published in October.
Its World Oil Outlook said it expects world oil demand to reach 116 million barrels a day (bpd) by 2045, around 6 million bpd higher than the previous year’s report, with growth led by China, India, other Asian nations, and Africa and the Middle East.
“We stand by what was published in our latest outlook we firmly believe that it is robust,” Al Ghais said.
OPEC is due to release the 2024 edition of the outlook later this year and Al Ghais said we would have to “wait and see” until September or October when it is due if numbers vary.
“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.”
ANGOLA’S EXIT
Al Ghais also said he was not concerned about Angola’s exit from the group, announced in December.
“It is not the first time a member exits the organization for its own considerations,” he said.
We have had members leave and members join and we have had some that leave and rejoin so I’m not too concerned about that.”
Angola said on Dec. 21 that it would leave OPEC, a decision that prompted a drop in oil prices at the time and that some analysts said raised questions about the unity of both OPEC and the wider OPEC+ alliance.
Al Ghais the country was welcome to rejoin if it wished to do so in the future.
The nature of production cuts being implemented by OPEC+, which brings together OPEC and its allies including Russia, being voluntary is a reflection of the group’s flexibility, Al Ghais said.
“For now it’s probably the most suitable way,” he said.
“A voluntary cut is a sovereign decision by a country to adjust its production. It shows the inherent flexibility in our approach and that we have several means and ways to attend to market stability.”
(Reporting by Maha El Dahan, Editing by Michael Georgy and David Evans)
