As the "swing producer" of OPEC+, Saudi Arabia's production capacity plays a decisive role in the market. Capacity flexibility and cost barriers: Saudi Aramco's oil extraction costs are as low as $2 per barrel, while natural gas costs are only $1 per barrel, significantly lower than international peers. Although its maximum sustainable capacity has declined from 13 million barrels per day to 12 million barrels per day, it still retains the ability to respond swiftly to market demands. For instance, in August 2025, Saudi Arabia's actual production was 9.7 million barrels per day, leaving 2.3 million barrels per day of idle capacity compared to the 12 million barrels per day production ceiling. Core weapon in market share battles: Saudi Arabia uses production increases to squeeze out high-cost competitors (such as U.S. shale oil). Currently, the average full-cycle cost of U.S. shale oil is around $54 per barrel, and if oil prices remain below $50 for an extended period, shale oil companies will face large-scale bankruptcies. Saudi Arabia's strategy aims to consolidate its dominant position in global crude oil supply through a "low-margin, high-volume" approach. Downstream diversification to hedge risks: Saudi Aramco is simultaneously increasing investments in downstream refining and petrochemical sectors, such as acquiring a 10% stake in China's Rongsheng Petrochemical for $3.4 billion and partnering with TotalEnergies to invest $11 billion in the Saudi Satorp petrochemical complex. These measures not only secure long-term crude oil demand but also enhance profits through high-value-added products, reducing reliance on crude oil price fluctuations. Investors must closely monitor OPEC+'s subsequent production ramp-up pace and marginal changes in global economic data to gauge market dynamics.

Author of this news: Ding Shuhan

Date: October 15th, 2025