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Oil a ‘Little Bit High,’ Saudi Arabia’s Al-Naimi Says

Posted by WARREN MOSLER on May 8th, 2012

As swing producer/price setter, they call the tune. But what they say publicly isn’t always what they do privately. I had thought they may be holding Brent at 120 and letting WTI converge to it as the new pipeline scheduled to begin May 15 worked to equalize prices. But it’s certainly possible they could converge at a lower price, if the Saudis so choose.

Oil a ‘Little Bit High,’ Saudi Arabia’s Al-Naimi Says

By Jacob Adelman and Yuji Okada

May 8 (Bloomberg) — Saudi Arabia is storing as much as 80 million barrels of crude to boost supplies amid international prices that are “still a little bit high,” according to the country’s oil minister Ali al-Naimi.

The nation, the world’s largest oil exporter, has set aside supplies “on shore in Saudi Arabia, in pipelines, in tanks,” al-Naimi said in Tokyo today before board meetings of state- owned Saudi Arabian Oil Co., of which he is chairman.

7 Responses to “Oil a ‘Little Bit High,’ Saudi Arabia’s Al-Naimi Says”

  1. walter Says:

    When you first wrote about the converging some weeks ago the spread was around $15 if i recall correctly. We did see $13 a few days ago, but we are back to $15 again after $16 earlier today.
    Still convinced of the converging? Still opportunity to trade long wti / short brent?

    Reply

    WARREN MOSLER Reply:

    yes, I think it may have been about 18 for the spot month, a bit less forward. the opening of the pipeline should contribute towards convergence.

    Reply

  2. walter Says:

    As far as I understand the Saudis supply 500K barrels per day to Japan now to replace previously domestically produced nuclear energy. Not much sign yet for support of USD/JPY though, back again below 80. Still to come or has that fact already long time been priced in by the market?

    Reply

    WARREN MOSLER Reply:

    i’d guess still to come

    Reply

  3. Paul Palmer Says:

    Maybe you should use how the Saudi’s do act as a de facto monopoly producer of crude oil, with how the US Govt. should act as the monopoly producer of currency.

    Reply

  4. John O'Connell Says:

    If supplies are being “set aside”, is that not withholding them from the market? And would that not tend to raise the price, not lower it?

    Reply

    WARREN MOSLER Reply:

    no, the saudis pump all their buyers want at their posted prices. if they also pump some to store that’s extra.

    Reply

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