Spare global oil production capacity is running thin and the world should be "worried" about the impact of a rebound in demand when China winds down its zero-COVID policy and aviation demand fully recovers, Saudi Aramco's CEO Amin Nasser said Oct. 4.
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Despite growing fears of a global recession, world oil demand could rebound sharply in China while jet fuel demand remains some 1.7 million b/d below pre-COVID levels, Nasser told the Energy Intelligence Forum in London.
"If China were to open up a little bit we will find our capacity eroded completely... when we erode that spare capacity, the world should be worried because there is no cover for any recovery or any unforeseen interruption anywhere in the world," Nasser said.
He said Saudi Arabia's own target to increase its production capacity remains on schedule. Saudi Aramco, which produces and sells oil on behalf of the Saudi state, is currently working to raise its production capacity to 13 million b/d by 2027, with capacity additions coming online in increments.
Saudi Arabia, the world's largest exporter of crude, pumped 10.92 million b/d in August, slightly below its quota under the OPEC+ agreement, according to the latest Platts OPEC survey.
The kingdom claims that it is capable of pumping 12.5 million b/d, if needed, although that is untested, and S&P Global Commodity Insights estimates that sustainable capacity is closer to 11.5 million b/d.
On prices, Nasser reiterated his concern that the global oil market is focusing on short-term economic fears of a global recession rather than supply fundamentals.
He said the oil market is "not reading the situation as it should be," citing low spare capacity, tight supplies, and noting that rising inflation is also impacting upstream project costs.
Platts assessed the Dated Brent physical crude price at $90.09/b on Oct. 3, up 6.5% from $84.63/b on Sept. 26, when rumors of an OPEC+ cut began swirling. But the benchmark is still down from a June 14 peak of $132.06/b, amid market concerns over a global recession.
Further out, Nasser said Aramco maintains its position that current net-zero emission scenarios to 2050 are unrealistic and are undermining the investment appetite for new oil and gas projects.
"Why would you invest if you think demand will collapse? For us, we continue to believe that demand will continue to grow to 2030," he said, adding that alternative energy sources such as solar and wind are "not ready yet to replace oil."
Aramco has been flagging the potential for higher oil prices due to falling oil and gas sector spending for years.
Speaking at an industry event last month, Nasser said an end to Russia's war in Ukraine would do little to reverse rising energy costs, pointing to the "shaming" of investment in the oil and gas sector and poorly thought out energy transition policies as the root causes of the current global energy crisis being felt most acutely in Europe.
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