Post by jeffolie on Apr 24, 2011 12:07:55 GMT -6
Saudis cut exports despite Libyan created supply decline
Actions speak louder than words...Saudis cut exports despite Libyan created supply decline
This piece does not mention the growing domestic use inside Saudi, does not mention the Saudi political unrest with rising prices nor sympathetic political unrest against Saudi's rulers being Sunni...keeping the Shiite street content with lower price petroleum produced domestically most likely influenced the decline of Saudi oil exports
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April 23, 2011
Saudi oil production and the Libyan conflict
One of the key questions in assessing the effect of the Libyan conflict on world oil prices was the extent to which an increase in Saudi production would offset some of the lost output from Libya. Now we know the answer, and it's not reassuring.
Back on Feb 25, Reuters reported what sounded like some favorable indications:
Top exporter Saudi Arabia has raised oil output above 9 million barrels per day (bpd) to make up for a near halt in Libyan exports, an industry source said, helping prices fall further from the highest since 2008....
The Saudi move follows reassurances from Riyadh earlier in the week that it was prepared to act to prevent shortages as a result of the rebellion in Libya.
Only it later turned out that this production increase was not in response to events in Libya, but in fact had been implemented some months earlier. And this week Saudi Oil Minister Ali Al-Naimi tried to get us to believe that the because there's way too much oil being supplied already.Saudis have now gone back to lower production levels
I kid you not. Here's the quote from Bloomberg:
"Our production in February was 9,125,100 barrels a day," al-Naimi said, as he arrived in Kuwait for a conference. "In March, it was 8,292,100 barrels. It will probably go a little higher in April. The reason I mention these numbers is to show you the market is oversupplied."
Well, if the supply of low-sulfur oil from Libya has decreased, and the supply of high-sulfur oil from Saudi Arabia has increased, equilibrium would require an increase in the price spread between sweet and sour crudes. Between January 7 and April 15, the price of low-sulfur Brent increased by $28.64/barrel. The price of higher-sulfur Saudi light increased by $27.92; in other words, the Saudis allowed the spread to widen by all of 72 cents. And the heavier Saudi grades went up $26.62. The only legitimate meaning one can attach to Al-Naimi's statement is that if the Saudis had wanted to sell 9 mb/d, they would have had to settle for less than a $25/barrel increase in the price of their lower grades.
Weekly price of Brent and three different Saudi grades in dollars per barrel, Jan 7, 2011 to Apr 15, 2011. Data source: EIA.
It's also interesting to evaluate these comments in light of the recent dramatic increase in Saudi drilling efforts, as described by Jim Brown on April 10:
We also heard just over a week ago from Halliburton that Saudi was upping its rig count from 92 to 118 with the majority of those new rigs going to the Manifa field. However, that news prompted even more concerns because the Manifa oil is heavy, sour crude. Why would you escalate production in heavy crude if the real problem facing the world right now is light sweet crude?
And, as if that weren't curious enough, a few weeks ago Bloomberg reported that Saudi Arabia plans to invest $100 billion in renewable energy sources. Jim Brown again:
In theory the country with the largest readily available oil reserves in the world is suddenly considering spending $100 billion on alternative energy so they will have more oil to export. Does that strike anyone else as strange? Wouldn't it be a lot cheaper to just punch a few more wells and produce more oil from the billions of barrels they have in reserve?
Here's Stuart Staniford's answer:
All of this evidence points in the direction of Saudi Arabia being unable to raise production much if at all in the near term.
You may call it unable, or you may call it unwilling. But whatever you want to call it, don't pretend that the Saudis' claimed excess capacity is oil that the world is actually going to use in 2011.
And whatever you want to call it, don't pretend that the current price of oil has nothing to do with supply and demand.
www.econbrowser.com/archives/201 ... odu_4.html
Actions speak louder than words...Saudis cut exports despite Libyan created supply decline
This piece does not mention the growing domestic use inside Saudi, does not mention the Saudi political unrest with rising prices nor sympathetic political unrest against Saudi's rulers being Sunni...keeping the Shiite street content with lower price petroleum produced domestically most likely influenced the decline of Saudi oil exports
===============================================
April 23, 2011
Saudi oil production and the Libyan conflict
One of the key questions in assessing the effect of the Libyan conflict on world oil prices was the extent to which an increase in Saudi production would offset some of the lost output from Libya. Now we know the answer, and it's not reassuring.
Back on Feb 25, Reuters reported what sounded like some favorable indications:
Top exporter Saudi Arabia has raised oil output above 9 million barrels per day (bpd) to make up for a near halt in Libyan exports, an industry source said, helping prices fall further from the highest since 2008....
The Saudi move follows reassurances from Riyadh earlier in the week that it was prepared to act to prevent shortages as a result of the rebellion in Libya.
Only it later turned out that this production increase was not in response to events in Libya, but in fact had been implemented some months earlier. And this week Saudi Oil Minister Ali Al-Naimi tried to get us to believe that the because there's way too much oil being supplied already.Saudis have now gone back to lower production levels
I kid you not. Here's the quote from Bloomberg:
"Our production in February was 9,125,100 barrels a day," al-Naimi said, as he arrived in Kuwait for a conference. "In March, it was 8,292,100 barrels. It will probably go a little higher in April. The reason I mention these numbers is to show you the market is oversupplied."
Well, if the supply of low-sulfur oil from Libya has decreased, and the supply of high-sulfur oil from Saudi Arabia has increased, equilibrium would require an increase in the price spread between sweet and sour crudes. Between January 7 and April 15, the price of low-sulfur Brent increased by $28.64/barrel. The price of higher-sulfur Saudi light increased by $27.92; in other words, the Saudis allowed the spread to widen by all of 72 cents. And the heavier Saudi grades went up $26.62. The only legitimate meaning one can attach to Al-Naimi's statement is that if the Saudis had wanted to sell 9 mb/d, they would have had to settle for less than a $25/barrel increase in the price of their lower grades.
Weekly price of Brent and three different Saudi grades in dollars per barrel, Jan 7, 2011 to Apr 15, 2011. Data source: EIA.
It's also interesting to evaluate these comments in light of the recent dramatic increase in Saudi drilling efforts, as described by Jim Brown on April 10:
We also heard just over a week ago from Halliburton that Saudi was upping its rig count from 92 to 118 with the majority of those new rigs going to the Manifa field. However, that news prompted even more concerns because the Manifa oil is heavy, sour crude. Why would you escalate production in heavy crude if the real problem facing the world right now is light sweet crude?
And, as if that weren't curious enough, a few weeks ago Bloomberg reported that Saudi Arabia plans to invest $100 billion in renewable energy sources. Jim Brown again:
In theory the country with the largest readily available oil reserves in the world is suddenly considering spending $100 billion on alternative energy so they will have more oil to export. Does that strike anyone else as strange? Wouldn't it be a lot cheaper to just punch a few more wells and produce more oil from the billions of barrels they have in reserve?
Here's Stuart Staniford's answer:
All of this evidence points in the direction of Saudi Arabia being unable to raise production much if at all in the near term.
You may call it unable, or you may call it unwilling. But whatever you want to call it, don't pretend that the Saudis' claimed excess capacity is oil that the world is actually going to use in 2011.
And whatever you want to call it, don't pretend that the current price of oil has nothing to do with supply and demand.
www.econbrowser.com/archives/201 ... odu_4.html