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Is Saudi Arabia waiting for even higher prices before it starts pumping more crude or is the...

Is Saudi Arabia waiting for even higher prices before it starts pumping more crude or is the country's 3M B/D spare capacity just a myth? Jeff Rubin contends the Saudis can't respond to today's high prices for the same reason they couldn't in 2008 - there's no more to pump. USO +0.6%, BNO +1.1%.
Comments (16)
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    Even if they can pump that much extra per day, getting that much capacity back online is not an overnight exercise.
    13 Apr 2011, 10:10 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1500) | Send Message
     
    OPEC knows it...SA reserves are overstated, their spare capacity is very little....

     

    It is in SA best interest to have the lowest oil prices possible without affecting their budget..why? Because if they let oil run too much alternatives would start to crumple the hegemony of king oil...
    13 Apr 2011, 10:12 AM Reply Like
  • DagnyTaggart
    , contributor
    Comments (486) | Send Message
     
    I think they have at least some of the claimed spare capacity. The problem with the Saudi capacity is it is heavy, nasty garbage oil. The refineries that accepted Libya's light sweet crude have no use for the spare capacity Saudi Arabia can provide. The Saudis are smart enough not to pump the crap that no one can refine.
    13 Apr 2011, 10:22 AM Reply Like
  • bigbenorr
    , contributor
    Comments (757) | Send Message
     
    What alternative can replace oil?
    13 Apr 2011, 11:37 AM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message
     
    Bigbenorr - lots of really smart people have asked themselves the same thing. Among the many ideas I thought this one was interesting:

     

    online.wsj.com/article...
    13 Apr 2011, 12:18 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (540) | Send Message
     
    If their 'spare capacity' is oil that no one can use, than it's not really spare capacity.

     

    To be fair to Jeff Rubin, he did reference this heavy oil in his article.
    13 Apr 2011, 12:18 PM Reply Like
  • Leftfield
    , contributor
    Comments (3781) | Send Message
     
    Wall St./Washingington debt, leverage and money printing is causing the cost of oil to skyrocket in dollars.

     

    Compared with real stores of value, oil isn't moving at all. Producers are aware that their compensation hasn't increased much or at all even if they receive more dollars.

     

    Dollars do not signal economic reality anymore, except for their own imminent demise.
    13 Apr 2011, 10:20 AM Reply Like
  • CharlieM
    , contributor
    Comments (150) | Send Message
     
    This appears to be a confirmation to the speculations that came with the breakout of unrest/war in Libya. It is doubtful that Saudi Arabia has the capacity they boasted to make up the volume drop experienced with the loss of Libyan oil.

     

    Given the King's spending to keep the unrest out of Saudi Arabia I am sure his advisors have calculated the costs and have given him a target volume vs price to support the spending without dipping into cash on hand. I see this as our paying to keep unrest out of Saudi Arabia.
    13 Apr 2011, 10:21 AM Reply Like
  • lafano
    , contributor
    Comments (221) | Send Message
     
    And why don't we want to drill again...lol...what a joke. Just the announcement alone will drive the price down (again). Why are we still relying on our enemies to satisfy our oil needs (gas)??? Why are we endorsing Petrobras to drill, drill and drill some more in the Gulf and we ban our companies to drill and put thousands of people on unemployment. Is Petrobras better equipped or drill safer than any of our companies, or is it that we want to make sure that the new marxist regime in Brazil succeeds? Or is it because the evil one - G Soros owns a large position in Petrobras??? Lets drill and put Americans back to work!
    13 Apr 2011, 10:34 AM Reply Like
  • CharlieM
    , contributor
    Comments (150) | Send Message
     
    lafano,
    I agree with you. Consider this too: Those drilling in Brazil will be the same companies that will drill in the U.S. So if they are supported and encouraged to drill off Brazil then why not the U.S.?

     

    Political Posturing!!! I firmly believe this is a play between the political parties. We KNOW that restoring oil productions in the U.S. would bring prices back down and spur job growth. BUT, some on capital hill are holding out for GREEN agendas, villifying oil and are out of touch with reality. Just look at how inflation rates are being reported. Gas costs are not even included in the calculations and yet it has a drastic affect on disposable incomes for not only individuals but business as well.

     

    I am going to go out on a limb here and say: If one side gets their social programs they want the rest will then be rewarded with the resumption of oil production in the U.S. In the mean time, figure out how you can afford to pay at the pump.
    13 Apr 2011, 10:53 AM Reply Like
  • lafano
    , contributor
    Comments (221) | Send Message
     
    CharlieM, I agree on all your points. The sad thing is - everyone, regardless of political persuasion is hurting over the (unnecessary) higher gas prices. I feel real bad over the fact that those just getting by financially, that live by paycheck to paycheck are getting hurt the most. And, this administration just simply ignores this fact. I remember 2008 when gas prices increased dramatically like today and everyone was screaming, including the media. At least, gas taxes were reduced and in some cased suspended for a period of time because of the impact on families. Today, nothing is being said, therefore, there is no pressure on the administration to do anything. Additionally, it doesn't appear that they are even interested in putting American's back to work. Politics and ideology stands in the way of our recovery.
    13 Apr 2011, 11:11 AM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message
     
    Wasn't there a post on SA just the other day saying the Saudis reduced output by 500k since the market was well supplied?
    13 Apr 2011, 12:00 PM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message
     
    Found it:

     

    seekingalpha.com/curre...
    13 Apr 2011, 12:12 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (540) | Send Message
     
    The IEA and the Saudis say 'reduced.' The article could be rewritten to say the "Saudis, unable to keep it up, had to cut production by 500K barrels/day."

     

    This is Rubin's point (not saying I agree or disagree) - he contends the Saudis have been continually lying about how much oil they can produce and have been doing it for years. This is the reason that high prices never seem to bring forth more supply from the Saudis - they don't have it.
    13 Apr 2011, 12:23 PM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message
     
    I recall Saudis bumping production by 1m in 2008; certainly their situation may have changed, but at the time no one thought they had capacity then either.

     

    I guess it depends on which side of the argument you sit. For my dollar, oil-nat.gas is so out of whack in historical terms I think there's a lot of funny business going on in oil.

     

    www.dailyfinance.com/s.../
    13 Apr 2011, 12:31 PM Reply Like
  • CharlieM
    , contributor
    Comments (150) | Send Message
     
    kmi,
    I agree with the statement you have made:
    "For my dollar, oil-nat.gas is so out of whack in historical terms I think there's a lot of funny business going on in oil."
    I have been looking at surplus levels in major oil using countries. I found that there is a lot of hoarding going on and that reserves are at all time highs. Simply stated I find that FEAR of disruption is driving this surge in oil prices. The fear that unrests in the Middle East will reduce or stop oil flows from that region of the world seems to have driven oil higher.
    To some extent I believe changes are needed in the region. And yet, I have to ask, does intervention benefit those that intervene to this end?
    13 Apr 2011, 02:58 PM Reply Like
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