Saudi Arabia does not target a specific level of oil production and its output is based on customers’ needs, the energy minister of the world’s largest oil exporter has said.
Speaking during an official visit to China, Khalid al-Falih told Al-Arabiya TV channel that despite low crude prices he was optimistic for global demand, that demand for crude in China remains “very healthy” and India’s demand was “very good” too.
“We in the kingdom of Saudi Arabia do not have a targeted number to reach. The kingdom’s production meets the requirements of the customers, whether they are outside internationally or inside the kingdom,” al-Falih said in remarks broadcast on Wednesday.
“The kingdom’s production policy will maintain a large degree of responsibility,” he said, signalling the kingdom would not flood an oversupplied market if there was no demand for it, a position Saudi Arabia has always said it holds to.
OPEC is due to meet informally in Algeria in September and is expected to seek to revive a global output freeze deal.
Saudi Arabia increased production in June and July to record levels to meet a seasonal rise in domestic demand and higher export requirements.
Industry sources have told Reuters Riyadh may have further boosted production to a record in August.
In July it pumped 10.67mn barrels per day, the most in its history. Al-Falih last week told Reuters production in August had remained around that level.
Saudi Arabia has a production capacity of 12.5mn bpd, leaving it able to boost output further to meet any global shortage. Al-Falih said that production level was not expected to be reached unless there were unexpected outages.
“The market now is saturated with oversupply and we don’t see in the short term a need for the kingdom to reach its maximum production capacity,” he told Al-Arabiya.
Al-Falih was on a visit headed by Deputy Crown Prince Mohammed bin Salman, aimed at bolstering relations with China, a top energy customer and trade partner.
Saudi Arabia has traditionally accounted for most of Asia’s crude needs, but has come under pressure from rivals such as Russia in a number of markets including China.
Al-Falih denied there was a price war between producers in China, adding that increasing Russian oil supplies to China “is something natural and we do not see it as a threatening move to Saudi Arabia.”
Under sweeping economic reforms led by Prince Mohammed, Riyadh plans to sell a stake of less than 5% in national oil major Saudi Aramco.
Al-Falih, Aramco’s chairman, told Al-Arabiya that China had shown interest in opening its stock markets for Aramco’s flotation.
Aramco has been in talks with China’s CNPC and Sinopec for investment opportunities in refining, marketing and petrochemicals.
Al-Falih said he hoped to reach a deal with CNPC before the end of the year, expecting investments in China to exceed $20bn, if the talks were finalised.
Aramco is talking to CNPC about two refineries in China, with one being built in Yunnan at a more advanced stage, he said.
Aramco is also in talks with Sinopec on a refinery in Qingdao. “We look forward to improve the economic feasibility of the project and finish the negotiations,” he said, adding Aramco is expected to take a stake of between 40 and 45% in such projects.
