Saudi Arabia raises oil output amid fears of supply crunch

Gas is flared off at Khurais oilfield. Saudi crude shipments rose during May to 7.16 million bpd, up 250,000 bpd month-on-month. (Reuters)
Updated 13 June 2018
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Saudi Arabia raises oil output amid fears of supply crunch

  • The IEA noted that only Saudi Arabia and OPEC’s other Middle East members have the ability to ramp up production swiftly to alleviate any supply shortages in the market.
  • US President Donald Trump blamed OPEC for excessive oil prices. “Oil prices are too high, OPEC is at it again. Not good!”

LONDON: Saudi Arabia posted the biggest month-on-month increase in oil supply of any OPEC country in May, according to the latest report from the International Energy Agency (IEA).
The Kingdom’s production was up 100,000 barrels per day (bpd) to 10.02 million barrels. Domestically, more crude was burned in Saudi power plants during the month, partly due to higher air-conditioning use.
The IEA noted meanwhile that only Saudi Arabia and OPEC’s other Middle East members have the ability to ramp up production swiftly to alleviate any supply shortages in the market. That is viewed as vital in the event of further output drops from Venezuela, and expected shortfalls from Iran when US sanctions bite later this year.
The report estimated that Middle East OPEC countries could increase production in fairly short order by about 1.1 million bpd, and there could be more output from Russia.
After oil prices surged to $80 a barrel in mid-May, Saudi Energy Minister Khalid Al-Falih said that the Kingdom, along with other producers, would ensure the availability of adequate supplies to offset any potential shortfalls.
According to information from data intelligence company Kpler, Saudi crude shipments rose during May to 7.16 million bpd, up 250,000 bpd month-on-month.
“However, even if the Iran-Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption. It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile,” the IEA said.
US President Donald Trump yesterday blamed OPEC for excessive oil prices. “Oil prices are too high, OPEC is at it again. Not good!” Trump tweeted on Wednesday, the second time in two months he blamed the bloc for higher oil prices.
Saudi Aramco is moving ahead with plans to raise output from offshore oil fields by more than 1 million bpd by 2023 to compensate for declining onshore production and to sustain overall capacity, which now stands at around 12 million bpd.
Aramco has invited bids to build new units to expand the Marjan oil field from 500,000 bpd currently to 800,000 bpd. Aramco also recently invited bids to boost the 300,000 bpd Berri field by 250,000 bpd. The expansion effort also includes the 550,000 bpd Zuluf field, where capacity will be raised by 600,000 bpd.
In May, the IEA said, higher flows from Saudi Arabia, Iraq and Algeria outweighed a fall in Nigerian supply and further losses in Venezuela, lifting OPEC crude production by 50,000 bpd to 31.69 million bpd. Crude oil output was nonetheless down 610,000 bpd on 2017 due to Venezuela’s sharp decline.
For 2019, IEA anticipates growth of 1.4 million bpd due to a “solid” economic background and an assumption of more stable prices. Demand growth for 2018 is also forecast at 1.4 million bpd.
But downside risks were growing in the wake of the G-7 bust-up involving President Donald Trump and his Western allies.
Dangers included the possibility of higher prices amid trade disruptions prompted by the tariffs war unleashed by the US against China, but which has also sucked in the EU, Canada and Mexico.
There were already signs of a slowdown in the growth of global trade volumes, the IEA said, which was “a concern.”


Davos turns its attention to those left behind by globalization: Interview with Mirek Dusek, WEF director

Updated 22 January 2019
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Davos turns its attention to those left behind by globalization: Interview with Mirek Dusek, WEF director

DAVOS: Mirek Dusek, senior WEF director, spoke to Arab News on the eve of the summit to reveal what will be on the agenda.

Q: What are the big themes of Davos 2019?
A: The theme of this year’s event is divided into two parts. One is globalization 4.0 and the other is about creating a new architecture for international cooperation. We believe that the world is entering quickly a new wave of “globalization.”
We have had different waves of globalization in our history and as a result, we have become integrated in terms of economies. We have lifted many people from around the world from poverty, which has led to immense economic growth driven increasingly by trade. But we have missed something, which is really that the rewards of this have not been shared equitably within nations in particular. So many people point to real incomes in the US, for example.
The rewards for the average American from globalization stopped back in the 1980s and 1990s. So while we realize that globalization is the reality around us, we believe we are entering a new wave that is driven by technological advancement.
We see the fourth industrial revolution all around us, so we believe we are gathered at a really important time to think through how we fix some of the shortcomings we have had in the past. The other part is how we can make sure that we equip the institutional framework to deal with this reality. What do we need to tweak around trade? What is needed in terms of consultation around climate change?
How do we make sure we have a functioning system of helping refugees around the world? These are the things high on the agenda that are quite hard to answer, but that does not mean we should ignore them.

Q: Not many Davos attendees are on zero-hour contracts. Given all the inequality we see in developed and emerging economies, is there more cynicism about the practical usefulness of events like these?
A: Back in the 1990s, Professor Schwab had a lot of foresight in publishing a piece exactly about this.
How do you make sure despite all the excitement about that wave of globalization that you do not leave people behind.
We all see that within nations, and they can be very diverse, from developed to emerging markets, there is a sense that some people have been left behind and that is a clear challenge for decision makers to face.
This meeting and the organization overall is really around providing a platform to accelerate positive change. If you take health for example, we’ve been working with the Bill and Melinda Gates Foundation.
We see our role as a platform for action by not only political leaders where they provide a policy framework, but also by a lot of the development institutions and business to come together and address some of the deficiencies in the system — like when we identified the deficiency around vaccination.

Q: To what extent is the rise in populism we have witnessed worldwide related to the fourth industrial revolution?
A: There have been other industrial revolutions, eras in which we saw rapid technological change — changing the way people organized themselves or how economies were structured — and so there has always been a level of uncertainty over what this change might bring. We have established a network of centers for technology governance. The sole purpose of that is to be on the front foot and enable governments to catch up with the tremendous development of these technologies. We are also looking at the trends in automation and what it may mean for the jobs of the future. We have a whole piece of work looking at the future of jobs. Nobody knows exactly what it will look like but if we look at past industrial revolutions, the adaptation has been quite remarkable.
Humanity has always found ways to cope with the change and you could argue the upside prevailed. But it is important we don’t underestimate this challenge, particularly in policymaking because if governments don’t have the capacity to react or think through these implications, we could be arriving at a reality that is given to us by random developments.

Q: Davos has always been good at presenting the big questions facing humanity, but what about providing measurable answers?
A: The fourth industrial revolution is an area in which we look for outcomes. I don’t want to pre-empt the announcements, but we are launching partnerships with governments to help them with specific issues. We have already worked in Rwanda with a team that does drone regulation — given how important drones are in that country for the delivery of blood, for example. Of course, we have collaboration with governments and businesses on cyber.
The final thing is around our work with peace and reconciliation. We have a track record for providing a platform here for actors who at least want to explore ideas of how to overcome certain fault lines from conflicts around the world.
This year, we are holding a record number of these meetings that we call Davos diplomacy dialogues. For the conflict in Syria, we are having the UN special envoy for Syria come here and hold a meeting. We are also doing dialogues on Venezuela, the Western Balkans and between Russia and Europe.