Saudis Full Out

4 August 2004

Saudi Aramco, the world’s largest oil company, has started production at two new fields three months ahead of schedule and may delay the shutdown of older wells to help meet increased oil demand, company officials said.

The development of the offshore Abu Saafah oil fields and the mostly onshore Qatif fields may boost the nation’s output capacity by 800,000 barrels a day, or 8 percent, when full commissioning is completed in as long as three months, Aramco spokesmen said in telephone interviews from Dhahran. Bloomberg.

Except that the Qatif-Abu Saafah upgrade project is designed to replace production capacity lost from depletion. That’s not a net gain.

So despite the Saudi bluster about being able to handle whatever the need might be (“No problem! We have it covered!”), it sounds as though they are maxing out.

The other thing to keep in mind: global oil consumption consistently tends to increase in the fourth quarter. Absent an economic slowdown—which isn’t on the horizon yet—demand will be increasing through the rest of the year.