Oil Video 11.08.20.
Saudi Aramco Plans To Increase Production Capacity To 13 Million Barrels Per Day
Yesterday, the world’s leading oil producer Saudi Aramco provided support to the oil market as it indicated that global demand for oil was recovering.
However, Saudi Aramco also made a worrisome announcement, confirming its plans to increase its production capacity from 12 million barrels per day (bpd) to 13 million bpd.
It is important to note that Saudi Aramco was talking about production capacity rather than actual production levels in the foreseable future.
However, it looks like Saudi Aramco has not abandoned its plans to grow its market share which has been under pressure ever since the U.S. shale oil industry emerged as a serious player in the market.
In the near term, this announcement is unlikely to hurt prospects for additional oil price upside. Longer-term, Saudi Aramco is likely making the necessary preparation for another war for market share.
It remains to be seen whether Saudi Aramco will be able to increase its production capacity anytime soon as the company has also announced that its capex plan for 2021 would be significantly lower than its previous guidance.
Oil Companies Get Their Oil Back From U.S. Emergency Reserve
According to a recent Reuters report, oil companies have started to claim back their oil that was stored in the U.S. emergency reserve during the acute phase of the coronavirus crisis.
At that time, fears about availability of storage capacity pushed WTI oil futures into the negative territory.
The report indicated that oil companies have used 2.2 million barrels out of 23 million barrels that they have previously stored. This move indicates that demand is rebounding, and the industry continues to work through excessive inventory levels.
However, there is still plenty of work to do. Traders will likely prefer to see a continued decline in inventory levels before they will be ready to push oil prices to new highs.
Today, the market will digest API Crude Oil Stock Change report which is expected to show that crude inventories continue to decline. In case the crude inventory draw is big enough, oil prices may get additional support.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire