Saudi’s Fail In Bid To Slash Oil Price: Here’s Why It’s Time To Buy Oil
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The mooted plan by Saudi Arabia to hike oil production in July by 200,000 barrels is marginal. It is not going to have a significant effect on the oil price. I am also not sure if it is true, after all it was UN head honcho Ban Ki Moon who revealed the plan and not the Saudis.
In fact, Opec has ALREADY been increasing production - and it has had little effect on the oil price. The oil cartel pumped an average of 32.24 million barrels per day (bpd) of crude in May, an increase of 370,000 barrels from the previous month. This is almost half the proposed new hike for next month. This 370,000-barrel increase in May had little effect on the oil price - and I reckon the latest plan will be just as ineffective as well.
I also believe that the Saudis will be pumping close to their limits after this production hike. They will be able to support any short-term increase in production as its Khursaniya oil field is expected to come fully on stream next month. However, the original plan for that field was to ramp up its production slowly, while using the new stream to allow some of the country’s older fields to rest.
Also, the field was expected to start pumping oil in 2007, but only started producing in 2008 because of technical delays. And even then, it was expected to produce 500,000 barrels per day, but is currently able of producing just 300,000 barrels per day.
So, with the Saudis close to full capacity they may not even manage to increase output by the 200,000 noted by the UN Secretary General. Even if they did - I don’t expect the oil price to fall by much. With world oil consumption currently at around 87m barrels a day, a 200,000-barrel increase represents just a 0.2% increase in production… that’s hardly spectacular, is it?
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Regards,
Garry White
Editor Smart Commodities UK
Source: Saudi’s Fail In Bid To Slash Oil Price: Here’s Why It’s Time To Buy Oil
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Tags: commodities, Global oil Consumption, Oil Cartel, Oil Market, Oil Prices, Oil Production, Opec, Saudi ArabiaAbout the Author
Garry White is the editor of financial newsletters Garry Writes and Outstanding Investments UK.