According to OPEC, Saudi Arabian production increased to 9.75mbd in July. This is a modern record (though they produced more back in the 1980-1981 timeframe). However, they didn't achieve the 10mbd that press reports were suggesting back in June. Whether because the press had the target wrong, or because they couldn't quite manage the goal, we are left to speculate.
It will be very interesting to see if they can maintain or further increase this level. However, if they can't, the current stock market chaos and drop in oil prices will provide them the perfect cover to reduce production on claims of lower demand.
The increase from May to July is about 800 or 900kbd - still some way short of making up for the loss of Libyan production.
6 comments:
Stuart,
you write "...on claims of lower demand." - You mean that lower oil prices do not represent lower demand?
Alex
Alexander Ac,
Lower prices could mean
a)Higher Supply
b)Lower demand
c)Combination of A and B
and most importantly in a market like crude , expectations of the above.
The Sub $50 price sounds like Automatic earth blog stuff....I am still waiting on the $200/oz gold idea.
Saif,
indeed, I am reading The Automatic Earth - and yes, I think it is rational to expect much lower oil prices as a result of deflation.
And yes, gold is in bubble too, but is is perceived as a "safe heaven" - now, it will go up for quite a long time, but the point is that eventually it will decrease below current levels... cash is king in a deflation.
Question: If the oil price decreased from 147 to 35 dollars, why could not it decrease from current levels to below 35 dolars or so? Any idea?
and another question: Do you think we could afford oil at current price without debt?
cheers,
Alex
First,
The price for a day a week or even a month for oil is quite irrelevant as one as an individual cannot buy and store it.
If I recall, when oil Hit $35, the price of futures more than 1 year out was still over $65/Barrel. A very steep contango. That $35 did not last too long either.
Cash is king in deflation, and Mish's Gold goes up during deflation are both wrong.
When Greece switches to Drachma, what do you think happens? Deflation?
When we had the only fiat currency deflation ever in Japan, Gold went down 60% in yen terms.
Do you know when Prechter first got bearish on Gold? $420/oz. I doubt the TAE will fare much better.
Saif,
of course, you have right to have your oponion and behave according what you think. No problem, you will bear the consequences.
35 did not last for long, but oil price decline was enough to cancel billions of dollars into future oil production, and that will happen again, no matter what.
Greece already is in deflation, as one can see - in debt-deflation, to be more precise. How do you think can expansionary (debt fuelled) inflatio can end? If Greece switches do Drachma, its currency will be devaluated *relative* to other currencies.
Alex
I have a lot to say about this subject but I do not want to Hijack Stuart's amazing blog.
I will leave you with this.
http://ispeakofpeak.blogspot.com/2008/12/in-not-to-distant-future.html
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