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Saudi Arabia output reaches an all time high - i doubt it

12/6/2011

Supposedly, SA recently decided to increase output to 10 million barrels a day.
I am with this guy:
“We doubt that Saudi will risk over-supplying the market, thus we are circumspect as to the announced 10 million barrel-a-day number,” said Harry Tchilinguirian, BNP’s head of commodity markets strategy in London. “Equally, if you look at International Energy Agency estimates for Saudi production going back to 2000, the kingdom has never produced 10 million barrels a day, and under the current market circumstances, a sudden and large jump in production relative to October levels appears counter-intuitive.”

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In the absence of a marginal supplier, demand drives oil and gdp drives oil demand

11/18/2011

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Speculation is often used to blame price increase in the oil markets, most recently in the historic increase – and then dramatic reversal in the Brent - WTI spread. The balance between supply and demand in the oil market has been tight for years. For most of the past decade, global economic growth has been strong and oil demand growth in developing countries, particularly China, has been growing at nearly twice the rate of the developed world. Also, excess capacity in OPEC has been diminishing. Despite rhetoric and promises to the contrary, Saudi Arabia has found it difficult to be the marginal supplier to the market. In the short run, oil demand is relatively unresponsive, inelastic, to price changes and as a result, real oil price growth has reasonably tracked growth in global GDP. Since 2007, the volatility of oil and the volatility of the S&P 500 have had a correlation of .87.

Currently, Saudi Arabia is scrambling to maintain production despite rig counts being near all time highs. So the demand story continues.

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Saudi Arabia output reaches an all time high - i doubt it

In the absence of a marginal supplier, demand drives oil and gdp drives oil demand

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