Saudi Arabia Responds to Oil Shock

Saudi Arabia still has a bit of grunt left apparently. It announced a production increase yesterday. Arabia will pump an extra 350,000 barrels a day. That makes 9.45 million barrels.

Putting oil in a barrel used to be like shooting fish in a barrel. You could do both with the one barrel. Yep. The olden days were good times for everyone.

Now it’s more difficult to raise new production. Apart from the Saudis, few other nations have shown themselves willing or capable to pull it off. This latest move is important. We’re about to find out how many countries have the oil to pump.

We said a couple of days ago that Saudi Arabia makes a lot more money at a higher oil price. What we should’ve also mentioned is that the higher oil price eventually destroys demand. America uses more oil than anyone, so Saudi Arabia has a vested interest in keeping America alive.

There have been signs recently that America is starting to struggle as a direct result of the oil shock. The US Federal Highway Administration reports that US drivers drove 11 billion 17.6 billion kilometers less in March. They’re recoiling from the sting of exorbitant petrol prices.

The Saudis didn’t like the sound of America using less oil. So they added new oil to the market. It’s no coincidence. And it’s now a matter of keeping the balance right. Drill enough energy to keep America on life-support…but not so much that it eats into cash-flow.

You’ll find that other OPEC nations have the same vested interest. If they’re going to add new production, now is the time. And as Gabriel Andre outlines in this month’s Diggers and Drillers, the oil price might finally be ready for a break.

A few months ago he made a similar call on the gold correction. “The bottom will be at US$860,” he rasped to us in an exotic French accent. Bullion dipped below that mark, but not for long. It’s been on the up ever since. Must be something in the croissants. Take a three-month trial to find out where he thinks oil prices will land.

Origin Energy to Become BG Property

It looks as though Origin Energy (ASX:ORG) is ready to sign off on a BG takeover. BG, one of the largest LNG exporters in the world, sweetened the deal first. Raising its bid from $14.70 per share to $15 may prove to be enough.

It’s more good news for coal-seam gas producers in Queensland. Anyone there with a coal asset is going up in price.

Engineers and Builders Enjoy Healthy Construction Demand

Every month, more roads and bridges spring up around the countryside. Australia’s construction activity grew by 2.3% in the March quarter.

The result for engineers was even better: 5.2% growth in engineering projects in the first three months of 2008. Well. We know what we’re doing this afternoon. Checking over the mining services sector to look for a cheap stock.

Source: Coal Delays at Dalrymple Lead to a Longer Boom

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