Wednesday, April 25, 2012

Goldman Sachs on Saudi Oil Production

Although not as murky as the silver or guar markets, figuring out what the giant oil producers and traders are up to sometimes reminds me of what the cold war kremlinologists attempted in trying to ascertain who was in/out at the top of the Soviet.
From FT Alphaville:
Saudi oil puzzle, continued
From the commodities research team at Goldman Sachs on Wednesday:
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
UPDATED--OPEC: "Saudi Arabia Books Most Oil Tankers to Supply U.S. in Years"
Saudi Arabia to Become the Saudi Arabia of Oil Deliveries (A Whole Lot of Oil Cometh)
Saudis Sending Seven Tankers to Begin Stockpiling Feedstock for Soon to Be Largest Refinery in the U.S., Motiva (RDS)
Saudi Arabia to Run Out of (exportable) Oil: "Keeping it to themselves"