Reserve oil capacity risks completely eroding as China reopens

(Bloomberg) – The world’s biggest oil company has reiterated its warning that spare capacity for producers is running out and said there will be none left once China ends its Covid Zero strategy.


“The world should be worried,” Saudi Aramco CEO Amin Nasser told a conference in London. “That’s where we’re headed. If China opens up a bit, you will find that the spare capacity will be completely eroded.

Aramco and Saudi Arabia officials have frequently criticized Western governments and companies for avoiding fossil fuel investments and trying to shift to renewables too quickly. They cited soaring oil and natural gas prices this year as evidence that more exploration projects are needed.

Brent crude soared above $125 a barrel after Russia invaded Ukraine in February. It has since fallen below $90, in part because tough coronavirus restrictions in China have suppressed demand in the second-largest economy.

Market share in Asia

Analysts say there is only about 2 million barrels a day of capacity that could come online quickly in the event of a supply disruption. This is the equivalent of 2% of the market.

Saudi Arabia and the neighboring United Arab Emirates are among the few major oil producers to increase their peak production levels. Nasser said Aramco is on track to increase capacity to 13 million barrels per day from 12 million by 2027, a project that will cost billions of dollars.

Aramco is confident it can maintain market share in Asia, where it sends about 60% of its crude shipments, and sees no more competition from Russia, according to Nasser. European refiners are increasingly avoiding flows from Russia, forcing Moscow to tap into markets such as China and India more aggressively.