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Aramco will have its oil production capacity fully restored happen by the end of next month, chief executive and chairman Amin Nasser said at an industry event in London as quoted by CNBC.
A report by Reuters from late September had quoted sources familiar with the matter as saying the Saudi major had restored its oil production to levels from before the attacks on oil infrastructure on September 14, and that its capacity had been increased to 11.3 million bpd—a figure it will not use for the time being thanks to the oil production cuts. Now Saudi Arabia is saying that it will have its capacity restored to 12 million bpd—the level will bring its capabilities back to what they were before the attacks.
Oil prices spiked following the attacks on an oil field and a processing facility, which Houthi rebels from Yemen took responsibility for. But Saudi Arabia and the United States blamed it on Iran. The spike did not last long, though, not least because of those earlier assurances that production—and production capacity—would come back online quickly.
Yet there were doubts: contractors contacted by Aramco told the Wall Street Journal there was no way that the lost 5.7 million bpd in production capacity could be restored so quickly because some of the lost equipment had yet to be manufactured, delivered and installed.
Nasser’s statement will likely be negative for prices: benchmarks are on a downward swing because of growing concern about global oil demand. This concern has become so strong that traders largely brushed off news about intensifying protests in Iraq and more protests in Ecuador, which has already forced the minor OPEC producer to cut oil output.
Brent and WTI were both up at the time of writing, although moderately. The assurance of Aramco’s CEO that capacity to the tune of 12 million bpd would be fully restored by end-November is unlikely to add fuel to this climb.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Contractors contacted by Aramco informed the Wall Street Journal there was no way that the lost 5.7 million barrels a day (mbd) in production could have been restored so quickly because some of the lost equipment has yet to be manufactured, delivered and installed.
Furthermore, Aramco’s claim that it will have a production capacity of 12 mbd by end of November doesn’t stand scrutiny. Saudi oil production peaked at 9.65 mbd in 2005 and has been in decline since. Even when they claim they are producing 10 mbd, at least 1.0-1.5 mbd of the 10 mbd come from stored oil. Therefore, they have no spare production capacity either.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London