Short term vs long term This news is probably one of the reason that WTI is soft this AM.
But this short term news viewed as a negative could turn out to be positive in the long run.
(Bloomberg) — Saudi Aramco abandoned a plan to boost its oil output capacity, a huge reversal that will raise questions about the kingdom’s view on future demand. The surprise move comes after the world’s biggest oil exporter had said in November that it was progressing “very well” with a multibillion-dollar project to boost capacity to 13 million barrels a day by 2027 as demand in China and India continues to grow. Saudi Arabia currently has capacity for 12 million and is producing about 9 million a day, after it curbed output as part of OPEC+ efforts to revive the global oil market and prevent a surplus. “There is likely to be much speculation on the potential implications on global oil demand over the medium and long term,” RBC Capital Markets analyst Biraj Borkhataria said in a note. “This also marks a change in tone from one of the world’s largest oil producers at the government level.”
The change in the investment plan ordered by the Saudi government comes at a time when Aramco has significantly increased dividend payments to the state, its primary owner. The kingdom is running a fiscal deficit as it spends tens of billions of dollars on efforts to diversify the economy into areas such as sports and tourism.
The decision will take out a significant portion of the supply buffer that traders were expecting for later this decade, a gap that may be hard to fill by others. Maintaining additional spare capacity is expensive, especially when the country is already producing well below its maximum rate and demand growth is likely to slow with the energy transition.
Aramco will update its capital spending plan when it announces annual results in March, according to a statement. RBC Capital Markets expects the company to lower its annual budget by about $5 billion from previous guidance.
We all know that Q4 resuIts are going to be down Q over Q but it will be interesting to get the
info. on January and early Feb. production results.
If they are similar to the spectacular December one, then soft pricing will be in part offset by that
production increase plus lower cost for the full Q of the labour reduction.
after a 4 day blimp, AECO gas as once again below $2 another + for SU.
Staying long