There is the meeting today of the oil producing nations and
the major oil customer nations to talk about the high price of oil. It
basically breaks down that the US is taking the position it is a production issue, and the oil producers say that
over speculation in the market has caused the increase (AP/Yahoo).
What is interesting in this article some exact quoted numbers of oil estimates of what the Saudi’s can produce. Quoting the article’s last paragraph: “CNBC said Saturday that Saudi Arabia's current capacity is 11.3 million barrels per day, quoting al-Naimi's adviser, Ibrahim al-Muhanna. Previous estimates by the International Energy Agency put current Saudi capacity at about 10.7 million barrels per day. The kingdom currently produces about 9.5 million barrels per day.”
The trick is reading between the lines and looking at the
required output numbers of overall world production. Taking a conservative
estimate of world use of 85 million barrels per day, in consideration of a 4.5%
growth rate, there needs to be a 3.8 million barrel increase per day by the Saudi’s
and/or OPEC to cover this growth. The Saudi’s only have a 1.2 million barrel per day
overhead until they reach maximum production output.
What people must understand is the speculators that are driving the prices are wondering if the world can come up with the 3.8 million barrels per day, in addition to covering the losses that are now frequently occurring as oil fields are starting to become depleted. That will be the question of the day.
Comments