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Aramco to Sustain High Oil Output

Aramco to Sustain High Oil Output
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Aramco to Sustain High Oil Output

Aramco to Sustain High Oil Output

State oil giant Saudi Aramco said on Monday it was likely to sustain higher oil output planned for April through into May, and that it was “very comfortable” with a price of $30 a barrel.

Aramco announced last week it would be raising its output in April to a record 12.3 million barrels per day.

“In a nutshell, Saudi Aramco can sustain the very low price and can sustain it for a long time,” Chief Executive Amin Nasser said on Monday during a full-year earnings call with investors and analysts. “For the production in May ... I doubt it would be any different from next month.”

Nasser said that the boost in output and exports would reflect positively on the company despite low oil prices. Aramco has some of the lowest production costs in the world.

CFO Khalid al-Dabbagh said Aramco was “very comfortable” with oil at $30 a barrel and would still be able to meet its dividend commitments and shareholder expectations at that price.

“We are very comfortable that we can meet our dividend commitment, and we are very comfortable that we can meet our shareholders’ expectations at $30 (a barrel) or even lower,” he said.

Nasser said Aramco would draw 300,000 bpd from its huge inventories to hit that record supply in April, and could sustain its maximum output of 12 million bpd for a year with no need for further spending. Saudi Arabia, the world’s top oil exporter, has hundreds of millions of barrels of crude stored.

He also said Aramco was currently evaluating boosting its maximum oil output capacity by another 1 million bpd to 13 million bpd.

Saudi Arabia said last week it would launch a program to boost production capacity for the first time in more than a decade.

It also said it plans to cut capital spending in the wake of the coronavirus outbreak, while posting a plunge in profit for last year.

Saudi Arabia’s decision last year to float shares in its state oil company - the most profitable company in the world - was one of the central elements in Crown Prince Mohammed bin Salman’s program for economic and political reform.

The record-setting IPO was touted as making the world’s biggest energy exporter more professional and transparent.

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Dollar Strengthens on Elevated US Bond Yields, Tariff Talks

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
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Dollar Strengthens on Elevated US Bond Yields, Tariff Talks

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo

The dollar rose for a second day on Wednesday on higher US bond yields, sending other major currencies to multi-month lows, with a report that Donald Trump was mulling emergency measures to allow for a new tariff program also lending support.

The already-firm dollar climbed higher on Wednesday after CNN reported that President-elect Trump is considering declaring a national economic emergency as legal justification for a large swath of universal tariffs on allies and adversaries.

The dollar index was last up 0.5% at 109.24, not far from the two-year peak of 109.58 it hit last week, Reuters reported.

Its gains were broad-based, with the euro down 0.43% at $1.0293 and Britain's pound under particular pressure, down 1.09% at $1.2342.

Data on Tuesday showed US job openings unexpectedly rose in November and layoffs were low, while a separate survey showed US services sector activity accelerated in December and a measure of input prices hit a two-year high - a possible inflation warning.

Bond markets reacted by sending 10-year Treasury yields up more than eight basis points on Tuesday, with the yield climbing to 4.728% on Wednesday.

"We're getting very strong US numbers... which has rates going up," said Bart Wakabayashi, Tokyo branch manager at State Street, pushing expectations of Fed rate cuts out to the northern summer or beyond.

"There's even the discussion about, will they cut, or may they even hike? The narrative has changed quite significantly."

Markets are now pricing in just 36 basis points of easing from the Fed this year, with a first cut in July.

US private payrolls data due later in the session will be eyed for further clues on the likely path of US rates.

Traders are jittery ahead of key US labor data on Friday and the inauguration of Donald Trump on Jan. 20, with his second US presidency expected to begin with a flurry of policy announcements and executive orders.

The move in the pound drew particular attention, as it came alongside a sharp sell-off in British stocks and government bonds. The 10-year gilt yield is at its highest since 2008.

Higher yields in general are more likely to lead to a stronger currency, but not in this case.

"With a non-data driven rise in yields that is not driven by any positive news - and the trigger seems to be inflation concern in the US, and Treasuries are selling off - the correlation inverts," said Francesco Pesole, currency analyst at ING.

"That doesn't happen for every currency, but the pound remains more sensitive than most other currencies to a rise in yields, likely because there's still this lack of confidence in the sustainability of budget measures."

Markets did not welcome the budget from Britain's new Labor government late last year.

Elsewhere, the yen sagged close to the 160 per dollar level that drew intervention last year, touching 158.55, its weakest on the dollar for nearly six months.

Japan's consumer sentiment deteriorated in December, a government survey showed, casting doubt on the central bank's view that solid household spending will underpin the economy and justify a rise in interest rates.

China's yuan hit 7.3322 per dollar, the lowest level since September 2023.