From FT Alphaville:
Saudi oil puzzle, continued
From the commodities research team at Goldman Sachs on Wednesday:Recently:
Saudi Arabian crude oil inventories built by 35.4 million barrels in the December-February period, adding 390 thousand b/d to world oil demand, according to data from the Joint Organisations Data Initiative (JODI). The strong build in Saudi inventories raises a number of questions, however. The foremost question being: why would Saudi Arabia increase its oil production to the highest level in over 30 years to simply put the crude oil into storage?It would appear that Saudi Arabia — the central bank of oil — is pumping oil at the highest rate in nearly 30 years just to put the crude oil into storage.
Well, one theory is that Saudi is worried about tensions between Iran and the West escalating. Opec effective spare capacity is less than 1m barrels per day, while Iran currently exports about 2.2m barrels per day. That means it would be hard to replace lost Iranian exports solely with production increases. In which case, Saudi preparing a buffer to help ease supply tensions if and when the Iranian export situation deteriorates further makes some sense.
Another theory, meanwhile, is that Saudi is preparing for peak power demand in the summer...MORE
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