On Tuesday, Saudi Aramco Chief Executive Officer Amin Nasser stated that the global oil spare production capacity could diminish next year as air passengers return to the skies, removing an important cushion that the market is currently enjoying.
Nasser stated, “The industry’s spare capacity, currently at 3-4 million barrels per day (bpd) is providing some comfort to the market, however, my concern is that the buffer … might diminish, especially next year when demand is expected to pick up further.” He added that a pick up in jet fuel demand, currently lagging some 3 million bpd behind 2019’s 7.5 million bpd mark, will eliminate all the spare capacity.
Space capacity is an important buffer for the oil market as it allows producers to quickly respond to unplanned outages that could tighten the market and cause big fluctuations in prices. Nasser reiterated that Saudi Arabia, the world’s biggest oil exporter, plans to rise its maximum sustained production capacity by a further 1 million bpd to 13 million bpd by 2027. He added, “Expanding capacity in our industry takes around 5-7 years and there is not enough investment in the world to increase capacity, this is a huge concern.”
