KEY TAKEAWAYS
- Saudi Arabia caps Aramco’s oil production at 12 million barrels per day.
- Previously, Aramco had plans to increase capacity to 13 million barrels per day for which it has made substantial investments.
- Aramco did not specify the reasons for this decision but stated that it will update its plan for capital spending in its full-year 2023 results in March.
The government of Saudi Arabia has ordered oil giant Aramco to cap its oil production at 12 million barrels per day, the world’s largest oil producer announced on Tuesday.
Aramco said it received a government directive to keep its Maximum Sustainable Capacity (MSC) at 12 million barrels per day as it was working to increase it to 13 million barrels per day. MSC is the average number of barrels per day of crude oil that can be produced in one year.
The state-controlled company didn’t disclose the reasons behind the Ministry of Energy’s decision but said it will update its capital spending guidance when it publishes its full-year 2023 results in March. Aramco has a strategic plan to increase its oil production to 13 million barrels per day by 2027.
Aramco raised $29.4 billion in a record initial public offering in 2019 and its large oil output is a key reason why Saudi Arabia is so dominant in the Organization of the Petroleum Exporting Countries. Still, over the years, the U.S. has caught up and topped the list of the world’s oil producers.
Aramco’s output limit also follows a slowing in oil demand growth last year to prepandemic levels. The International Energy Agency also said in its monthly report that growth is projected to ease to 1.2 million barrels a day in 2024 from 2.3 million barrels a day last year.