Saudi Aramco gas deal signals commitment to oil cuts: report

Saudi Aramco's deal to buy a 25 percent stake in Sempra Energy’s Port Arthur liquefied natural gas terminal in Texas is a sign the kingdom may be willing to support crude production cuts for longer as it seeks to reduce economic reliance on oil, Bloomberg reported citing a Brookfield Asset Management Inc. official.

“The investments are consistent with Saudi Arabia’s 2030 vision to diversify away from oil and has spurred the country’s willingness to cede crude market share to the US and others through production cuts,” said Jeff Jorgensen, portfolio manager and director of research at Brookfield’s Public Securities Group.

“To the extent that they make downstream investments, I think it’s a good sign on their willingness on the crude side to continue to support the production cuts and extend them,” Bloomberg quoted Jorgensen as saying in an interview in New York.

This means the Saudi LNG investment may ultimately benefit oil prices and American crude producers. With Saudi Arabia accounting for about 70 percent of the spare capacity from OPEC and its allies, the move could also recouple oil and gas fundamentals in a way that hasn’t been seen for years in the US, Jorgensen said.