Saudi Arabia’s surprise reversal of its oil expansion plan was at least six months in the making and spurred by uncertainty over the market’s need for additional spare capacity, an industry source told Reuters.

State oil giant Aramco 2222.SE was ordered by the Saudi energy ministry on Tuesday to halt plans to boost its maximum sustainable capacity to 13 million barrels per day (mbpd), returning to the previous 12 mbpd target.

The kingdom is the world’s largest oil exporter and is pumping around 9 mbpd, well below capacity after it cut production as part of an agreement with OPEC and its allies last year.

With so much spare capacity already, an assessment was made that much of the kingdom’s excess supply was not being monetized, the source said.

The decision came from the top, the source said, a comment echoed by a second source with knowledge of the matter.

Crown Prince Mohammed bin Salman, during U.S. President Joe Biden’s visit to the kingdom in July 2022, warned that Riyadh “will not have any more capability to increase production” after it reached the now-scrapped 13 mbpd goal.

The kingdom had ordered Aramco to expand to that level in March 2020, when it was in a stand-off with Russia. OPEC, under the de facto leadership of Saudi Arabia, is now working closely with Russia as part of the so-called OPEC+ alliance.
Source: Reuters (Reporting by Maha El Dahan and Yousef Saba; Editing by Edmund Blair and Mark Potter)