No plans to cut oil output, says Saudi Aramco chairman

State-owned Saudi Arabian Oil Co. (Saudi Aramco) is not planning to scale back on oil production despite financial pain resulting from the kingdom’s strategy to defend its market share, the company’s chairman Khalid Al-Falih told the Financial Times.

“The only thing to do now is to let the market do its job. There have been no conversations here that say we should cut production now that we’ve seen the pain,” Al-Falih said The chairman, who also serves as the country’s health minister, said he expects the oil market to stabilize in 2016 and later witness an uptick in demand. Other unnamed officials told the financial news provider that it would probably be one or two years until the oil supply glut is eliminated.

Oil prices have fallen sharply since last year’s high of over $110 per barrel (bbl) to below $50/bbl. For high-cost producers, Al-Falih explained how $100 oil was considered to be a “no-risk investment”, arguing that such an “insurance policy” does not exist anymore.

The sharp decline in government revenues is set to lead Saudi Arabia this year to a fiscal deficit, representing around 20 percent of its gross domestic product (GDP), according to IMF’s latest estimate. The kingdom has introduced measures to cut spending and placed a freeze contracts on new projects, recent media reports suggested.

Oil producers are now cancelling projects rather than just deferring them, the FT added, which has raised concerns within the industry.

“Now everyone is running to the exit and projects are being cancelled,” Al-Falih added. “That’s necessary, but what will happen five to ten years from now? Investment is needed.”