Aramco says global oil spare buffers to slump when China reopens

The world’s biggest oil company reiterated its warning that producers’ spare capacity is running low and said there wouldn’t be any left once China ends its Covid Zero strategy.

“The world should be worried,” Saudi Aramco’s chief executive officer Amin Nasser said at a conference in London. “This is where we are heading. If China opens up a little bit you will find out that spare capacity will be eroded completely.”

Aramco and Saudi Arabian officials have frequently criticised Western governments and firms for shunning investment in fossil fuels and trying to transition to renewable energy too quickly. They’ve cited this year’s surge in oil and natural gas prices as evidence that more exploration projects are needed.

Brent crude climbed above $125 a barrel after the Russia-Ukraine crisis in February. It’s since dropped below $90, in part because China’s strict coronavirus restrictions have suppressed demand in the second-biggest economy.

Analysts say there’s only about 2 million barrels a day of capacity that could be brought online quickly should there be a supply shutdowns. That’s the equivalent of 2 per cent of the market.

Saudi Arabia and neighbouring UAE are among the few major oil producers raising their maximum production levels. Nasser said Aramco was on track to increase its capacity to 13 million barrels a day from 12 million by 2027, a project that will cost billions of dollars.

Aramco is confident it can maintain its market share in Asia, where it sends about 60 per cent of its crude shipments, and doesn’t see more competition from Russia, according to Nasser. European refiners are increasingly shunning flows from Russia, forcing Moscow to tap markets such as China and India more aggressively.