Wednesday, December 15, 2010
While I'm updating my OPEC spreadsheet, it seems like a good idea to look at Saudi Arabian oil production. This will be an interesting thing to watch in coming months. The flow of US economic news has been turning a little more positive recently, and global oil production is increasing again. In that environment, I would expect oil prices to increase (albeit probably fitfully), and then it becomes a very interesting question at what price Saudi Arabia will restore the production they cut at the onset of the great recession.
Looking at the graph above, three out of four data sources claim Saudi production has already started to increase (specifically, the IEA, OPEC, and the EIA, the latter particularly strongly so). The increase only amounts to a few hundred kbd, and the Saudi's themselves (via their self reports to JODI), do not say they are increasing production. Still, I'm inclined to wonder if the beginning of a slow trend to increasing Saudi production has begun. The highest value of production Saudi Arabia has been able to demonstrate in recent years is 9.5mbd (based on the average index - black line - above). They are about 1.3mbd below that today.
On the other hand, rig counts have continued to drift down through most of 2010, suggesting that Saudi Aramco doesn't currently anticipate their capacity coming under pressure:
Unless you think that little uptick in November is the start of something bigger.