DHAHRAN, Saudi Arabia-Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said Tuesday, potentially adding a new flood of crude to a global glut that has pushed prices to record lows.
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Al-Naimi will be replaced by Khalid al-Falih, the head of Saudi Aramco.
“We remain committed to maintaining our role in global energy markets and strengthening our position as the world’s most reliable supplier of energy”, Al-Falih, who remains Aramco’s chairman, said in a statement on May 9, his first day in office.
Crude prices extended gains on Monday as raging wildfires hit production in Canada, while traders digested also the surprise news that Saudi Arabia had replaced its long-standing oil minister.
The kingdom’s Petroleum Ministry has been renamed the the Ministry of Energy, Industry and Mineral Resources and the Ministry of Electricity has been folded into the kingdom’s energy portfolio, Reuters said.
The changes are part of a much wider and ambitious plan to shake up the economy under the label “Vision 2030”, which includes diversifying the economy away from oil and reducing government control.
The change is unlikely to mean a shift in Saudi oil policy, which is being crafted to a large degree by Deputy Crown Prince Mohammed bin Salman, who oversees the kingdom’s energy and economic policies, and involves building consensus among top royals based on the advice of senior technocrats. He said demand was trending higher in other places as well, such as India and the US, and that the company expected demand to rise by 1.2 million barrels a day this year.
The weekend’s Number One Big Saudi Event was the ease-out of 80-year-old oil minister Ali al-Naimi.
The 250,000 bpd capacity increase, taking Shaybah’s total production capacity to 1 million bpd, is aimed at rebalancing Saudi Arabia’s crude oil quality and compensating for falling output at other fields as they mature, he said.
Oil prices dropped to their lowest level in over a decade earlier this year as producers pumped more oil than the world needed. “Prices will trend higher when that happens”.
Oil prices retracted slightly on Wednesday: US benchmark West Texas Intermediate was down just under one per cent to $44.23 a barrel at press time.
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At the producers meeting in Qatar last month, Naimi was reportedly willing to agree to freeze production without Iran going along, but Prince Salman disagreed, and no output cap was agreed on.
