Saudi Arabia Continues to Hold its Hand in the Production of Oil as it Sounds a Cautionary Note
Prince Abdulaziz bin Salaman, the Saudi Arabi minister of Energy, recently declared that the Kingdom would continue to stay its hand in oil production amidst increasing global demands. This move is in response to the predicted hike in the price of oil and the impact it may have on the liquidity of oil markets and the world economy.
Why is Saudi Arabia Attempting to Restrict Oil Production
The Minister of Energy for Saudi Arabia has rightly stated that the country will be ever more cautious about threading into the murky waters of increased oil production. He further declared that as it stands, the current demands in the global market are likely to cause oil prices to surge beyond USD 100 per barrel.
According to the International Energy Agency forecast, global oil demands will increase by 1.9 million barrels daily in 2023, with nearly half of that coming from China. However, the Agency has also reiterated that the supply growth within the same period will slow down significantly. However, Saudi Arabia is doing everything within its capacity to increase production and supply growth. However, the CEO of Saudi Aramco, Amin Nasser, has expressed worry about the country having enough ability to meet the demands, increase supply, and offset the decline in oil production.
This impending danger to the oil market is quite evident considering the various sanctions imposed on Russia after it invaded Ukraine in February 2022. Several nations and organizations have continued to increase the sanctions imposed on Russia.
What are the Clapback of the Restrictions
Prince Abdulaziz, bin Salman, has declared that these sanctions on Russia are more likely to backfire on the global markets if the lag in demand caused by the sanction does not pick up quickly. Without mincing words, the Minister stated that he believes that the sanctions and embargoes will all convolute to the lack of energy supplies when they are most needed. Perhaps, this is why the Kingdom has continued to remain in talks with Russia regarding OPEC+-related issues.
CEO Amin Nasser also reiterated that it would require additional supply and investment until the countries’ economies improve significantly. As such, if the necessary cuts and restrictions are not made beforehand in such periods, there is a high likelihood of a global market crash with the oil market unable to meet growing demands.
Conclusion
The Kingdom of Saudi Arabia has always issued warnings regarding the discrepancies between oil demands and oil supply, with the latter lower than the former. Unfortunately, it would seem that Saudi Arabia’s warning are true, and the failure of the world to proffer a long-lasting solution to this problem may spell doom for the global oil market.
Last Updated on 9 months by News Editor
