Tag Archives: Saudi

Saudis to pump 10 million bpd

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The Saudis don’t sell in the spot markets, they only post prices to refiners and then take orders at those prices.

That is, they post price and let quantity vary.

So the only way they could definitively get to 10 million bpd would be to change policy and sell in the spot market, which would let loose a downward price spiral until some other producer decided to cut production to stop the fall.

As always, it’s their political decision, and no telling what they might actually do.

Saudi Shows Who’s Boss, to Pump 10 Million Barrels Per Day

June 10 (Reuters) — Saudi Arabia will raise output to 10 million barrels day in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone in unilaterally pumping more outside OPEC policy.

Citing OPEC and industry officials, the newspaper said output would rise from 8.8 million bpd in May. There was no immediate independent verification of the story.

The report suggests Riyadh is asserting its authority over fellow members of the Organization of the Petroleum Exporting Countries after it failed to convince the 12-member cartel to lift output at an acrimonious meeting in Vienna on Wednesday.

“The Saudi intention is to show that they cannot be pushed around,” said Middle East energy analyst Sam Ciszuk at IHS. “Either OPEC follows the Saudi lead or they will have problems.”

A proposal by Saudi and its Gulf Arab allies the UAE and Kuwait to lift OPEC production was blocked by seven producers including Iran, Venezuela and Algeria.

The two sides blamed each other for the breakdown in talks. Saudi Oil Minister Ali ali-Naimi called those opposed to the deal obstinate. Iran’s OPEC governor Mohammad Ali Khatibi responded by saying Riyadh had been overly-influenced by U.S.-led consumer country demands for cheaper fuel.

“The hawks in OPEC called their bluff and now it is up to Riyadh to show that they were not bluffing — that they will go ahead unilaterally if pushed,” said Cizsuk.

Saudi Arabia has not pumped 10 million bpd for at least a decade, according to Reuters data, production having peaked at 9.7 million bpd in July 2008 after prices hit a record $147 a barrel. It is the only oil producer inside or outside OPEC with any significant spare capacity.

Asked in Vienna on Thursday whether Saudi would reach 10 million bpd Naimi said: “Just send the customers, don’t worry about the volumes.”

Gulf delegates said Riyadh was planning to pump an average 9.5-9.7 million bpd in June.

Saudi is already offering more crude to refiners in Asia, which, led by China, is driving a global rise in oil consumption.

Forecasts from OPEC headquarters show demand will increase about 1.7 million bpd in the second half of the year from recent cartel output of about 29 million bpd.

Brent crude rose to a 5-week high of $120 a barrel after the OPEC talks broke down. Prices eased after Friday’s Saudi news, last dipping 63 cents to trade near $118.94 a barrel.

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Crude oil prices

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I believe the Saudi guy:

Qatar energy official: OPEC willing to cut output

by Adam Schreck

Feb 15 (AP) — A senior Qatari energy official said Sunday that OPEC is watching the oil market closely and stands ready to cut output further when it meets next month.

Mohammed Saleh al-Sada, Qatar’s minister of state for energy and industry affairs, told reporters on the sidelines of a conference in Doha that the Organization of Petroleum Exporting Countries “will respond appropriately” to the rapid drop in oil prices.

“If there is a need, actually, to go down, they will not be hesitant to reduce it further,” he said, without saying by how much.

The oil-producing group, he said, was facing difficulties in setting output because of the “unusual situation” of extreme fluctuation in prices. “The volatility is huge,” said al-Sada.

Al-Sada said a “reasonable price” for oil would be $70 a barrel -well above the $37.51 benchmark light, sweet crude settled Friday.

In Kuwait, however, a senior oil official said crude prices are unlikely to rise above $40 per barrel, even if OPEC decides to cut as much as 2 million barrels per day at its meeting next month.

Moussa Marafi, a member of the Supreme Petroleum Council, Kuwait’s highest oil policy-making body, told Annahar newspaper in comments published Sunday that oil prices are being pressured by surging U.S. crude inventories and a lack of compliance to quotas by some OPEC members.

The comments come a day after the oil minister of Venezuela, a traditional price hawk, said it would support new production cuts. Oil Minister Rafael Ramirez said the group is worried because commercial inventories are still «very high.

OPEC members have agreed to slash production by 4.2 million barrels from September levels in an effort to put a floor beneath prices that have tumbled by nearly three-quarters from the record highs they hit over the summer.

The group, which produces about 40 percent of the world’s oil, said last week it has completed about 80 percent of those previously agreed cutbacks.


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US gasoline demand

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While demand has been falling, it’s only down about 500,000 bpd year over year. World demand is growing faster than that and is still forecast to grow by about 1 million bpd in 2009, last I heard.

This means the demand for Saudi crude will stay more than high enough for them to continue to be swing producer/price setter.

Change in Gasoline Demand


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2008-08-12 Saudi Oil Output

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Saudi Oil Output

The Saudi production increase tells me world demand was up, even at the higher prices.

Yes, US demand was down 800,000 bpd vs last year, and yes other world demand may fall.

Only when demand for Saudi output falls sufficiently will they be dislodged from being swing producer and price setter.

That is not to say they won’t continue to disguise their role as best they can, and allow volatility as various world inventory positions (cash and futures) are being liquidated, as is probably the case currently.

Saudi output is also getting very near capacity of maybe 11 million bpd.

If demand goes above that they lose control of price on the upside.


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Re: Pension fund passive commodity strategies

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(an interoffice email)

>
>   On Wed, Apr 9, 2008 at 4:05 PM, Pat wrote:
>
>   What about the continued allocation increases from non-end
>   users of commodities? From what I’ve read allocations by
>   pensions have gone higher even with the rising prices as well
>   as a whole host of new entrants (ETFs, HF’s, etc…) Are these
>   compounding the problem or are they the root of the
>   commodity price inflation?
>
>

passive commodities are part of the landscape for sure:

  1. put upward pressure on competitive commodity spot prices
  2. put downward pressure on the $
  3. add to gdp
  4. in general, help ‘monetize’ saudi crude price hikes
  5. put upward pressure on crude futures
  6. serves no public purpose
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Saudi production up a tad

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2008-01-08 Saudi Production

Saudi production increased marginally for January, and all indications are net demand is holding up at the higher prices.

While this bodes for continued price hikes, markets may have likely sold off on the news, believing the higher production is a sign of a proactive supply increase that will drive prices down.

It’s the difference between getting your offer lifted vs your bid hit. Saudi (and Russian) offers are clearly getting lifted.

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Crude oil demand revised up

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This means Saudis/Russians will continue to be price setters for at least the next few quarters.

IEA Lifts 2008 World Oil Demand Growth Forecast

By Reuters | 14 Dec 2007 | 05:32 AM ET

World oil demand will grow more quickly than expected next year fueled by the Middle East and proving resilient to record-high prices, the International Energy Agency said on Friday.

The IEA, adviser to 27 industrialized countries, said in its monthly Oil Market Report that demand will rise by 2.1 million barrels per day (bpd) next year, up 200,000 bpd from its previous forecast.

“A lot of this demand is in the non-OECD countries, where we don’t have any downgrades in economic growth forecasts,” said Lawrence Eagles, head of the IEA’s Oil Industry and Markets division.

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