Last week, the markets were buzzing with the news that Saudi Aramco had halted its plans to expand production capacity with the goal it set for itself, which is to reach 13 million barrels per day by 2027, which sparked a wave of speculation that swept the local and global markets in an attempt to find out the motives that drove such a decision and what the effects were. The future of oil markets and the consequences on the global economy,
The Saudi financial markets have bled before the international markets, affected by concerns about Saudi Aramco’s ability to move forward with its investments and about the health and solidity of future demand for oil. The Kingdom has gone some way to diversify its sources of income, but it still constitutes a percentage higher than 55% of the total sources of income.
The truth is that if we want to delve deeper into the motives for this decision, even though they appear to be related to the current conditions of the global oil markets, the main driver is beyond that and is strategic for the company and the state. Over the past two years, it has become clear that the oil markets have lost excessive sensitivity and sharp fluctuations up and down, not geopolitical tensions. Nor do threats to the sources and routes of the movement of oil tankers make a significant difference in oil markets unless there is a real, significant, direct threat that results in a severe shortage in production and paralyzes the global economy or part of it. Perhaps the war on Gaza that is taking place in a region that is considered the most important sources of oil and the threats that afflict it In one of the most important straits, which is the Bab al-Mandeb Strait, through which 19% of the world’s tankers pass, there is realistic evidence that confirms that we have lost the sensitivity factor that leads to sharp and critical fluctuations. Production capacity is influential and likely in the path of market stability when the markets’ sensitivity and response speed are high, and given the size of production capacity. Currently available to the Kingdom at the current production rate is nine million barrels per day, which constitutes three million barrels per day, which makes such a volume of additional production capacity sufficient to create a balance if the markets require it. Therefore, the increase of a fourth million of this capacity in the current market conditions and the slowness of their response and uncertainty. surrounding the global economy and pushing transformation programs that push additional sources other than oil, including the Kingdom itself, which invests in renewable energy. All of this may not justify moving forward with giant investments at the present time and pushes other investment paths that suit the current conditions and available opportunities, and perhaps the problem of American production. Which has reached record historical levels, touching the limits of 13.5 million barrels per day, and the surplus that is being pushed into the markets reaffirms and provides an additional reason for the markets not needing additional production capacity, in addition to any future opportunities for Iranian oil to enter the markets as a major player trying to increase its production capacity, especially if it is Lifting the sanctions on it. As for Saudi Aramco, it now has opportunities to focus on expanding gas projects to feed electricity sources. Thus, it will contribute to creating a production capacity of one million barrels by 2030, which is what is currently consumed to supply the Kingdom with electricity, confirming once again that there is no need to invest in additional production capacity. Also, Aramco It sees tremendous opportunities outside the oil sector, as it is an energy company, and it seems that it will also direct its investments further outside the boundaries of its business to benefit from the enormous opportunities in vital sectors such as technology, artificial intelligence, data, and others, to maximize the returns on its investments and to strengthen its position as a company that sits on the throne of the world’s companies in terms of market value and the size of its contribution. In the domestic product.
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