On Tuesday, the Secretary General of OPEC stated that Saudi Arabia’s decision to postpone oil capacity expansion plans should not be taken as a sign that demand for crude oil is decreasing. Haitham Al Ghais clarified that he cannot comment on a Saudi decision, but emphasized that the move is not an indication that demand is falling.
The Saudi government had previously ordered state oil company Aramco to lower its target for maximum sustained production capacity to 12 million barrels per day (bpd), which is 1 million bpd below a target announced in 2020 and set to be reached in 2027. Reports suggest that the kingdom’s decision was based on an assessment that much of Saudi Arabia’s excess oil capacity was not being monetized.
Saudi Arabia is the world’s largest oil exporter and the de facto leader of OPEC. The organization had raised its world oil demand forecasts for the medium and long term in its annual outlook published in October. The report stated that it expects world oil demand to reach 116 million barrels per day (bpd) by 2045, around 6 million bpd higher than the previous year’s report.
Al Ghais reiterated that OPEC stands by its latest outlook, and they firmly believe that it is a robust report. OPEC is due to release the 2024 edition of the outlook later this year, and Al Ghais said that we would have to wait until September or October to see if the numbers vary. He added that changing narratives around the world, such as countries slowing down and rethinking their net-zero goals, may create further long-term demand for oil.