Aramco is the largest oil company in the world (Reuters)

Saudi Aramco - the largest oil company in the world - said today, Tuesday, that it had received a directive from the Ministry of Energy in the Kingdom to maintain the maximum production capacity level at 12 million barrels per day, and not to continue raising the maximum sustainable production capacity to the level of 13 million barrels per day.

Aramco explained that the level of maximum sustainable production capacity is determined by the state, according to what was reported by the Saudi News Agency (SPA).

In 2020, the Saudi Ministry of Energy instructed Aramco to embark on a multi-year, multi-billion-dollar program to increase its maximum production capacity to 13 million barrels by 2027.

Saudi Arabia is the largest exporter of crude oil in the world, with a daily average exceeding 7.5 million barrels under normal conditions, and the second largest producer after the United States, with a daily average of 11 million barrels, under normal conditions as well.

While Aramco did not announce the reason for the directive issued by the Saudi Ministry of Energy, this will be a factor in raising oil prices, when risks arise that may affect global crude supplies.

Brent crude futures fell 0.34% to $81.56 per barrel by 12:18 GMT, after they had risen slightly in early trading.

No change in trends

Reuters quoted an informed source as saying that this step in no way reflects a change in views regarding future oil demand scenarios.

He added that the change was not the result of technical problems, but rather under the guidance of the government, and continued, "If the government decides to go in the other direction, the company is ready."

Aramco had expected capital spending ranging between 45 and 55 billion dollars in 2023 (Reuters)

Although the informed source rejected the idea of ​​any change in demand expectations, he suggested that there would be a lot of speculation in the market about the potential repercussions on global demand for oil in the medium and long term as a result of the decision.

The informed source said that this change will drive momentum towards growth areas for Aramco, such as gas and new energy sources.

Aramco began its mergers and acquisitions efforts in the field of liquefied natural gas last year, buying a minority stake in Mid Ocean Energy for $500 million.

Capital spending

Aramco is expected to announce the latest developments on its capital spending plans when it announces full-year 2023 business results next March.

RBC Capital Markets said in a note today that it expects to proceed with the plans for which final investment decisions have been taken, such as projects to raise the capacity of the Zuluf field to 600,000 barrels per day, the Marjan field to 300,000 barrels per day, and the Berri field to a capacity of 250,000. barrels per day.

But RBC “likely postpones” projects that have not been decided upon, such as the Safaniya field project with a capacity of 700,000 barrels per day.

The memo stated, "We assumed a budget of (about) $12 billion for the Safaniyah project, of which $3 billion will be spent in 2024."

She added, "In general, we expect to reduce the capital expenditure budget by (about) $5 billion annually over the coming years compared to the previous guidance."

Aramco had said that it expects capital spending ranging between 45 and 55 billion dollars in 2023, the highest in its history, and indicated that it would increase this in the coming years.

“It may be (the cut) to provide liquidity,” said Bjarne Schildrup, an analyst at SEB. “But it is more likely that this implies that it does not see a need for this additional oil on the global market.”

Source: Agencies