Tuesday, March 20, 2012

Mr Al-Naimi Beats Oil Markets with Jawbone Again

In a rather breathless top-of-website story, the FT's Guy Chazan writes:
Saudi Arabia’s powerful oil minister, Ali Naimi, made a rare intervention into overheating oil markets on Tuesday, declaring that high oil prices were “unjustified” and vowing that the kingdom would boost its output by as much as 25 per cent if necessary.
Mr Chazan must not have been paying attention or he would know that Mr al-Naimi trying to cause the supply and demand curves for oil to intersect at a different place by jawboning them is a regular feature of the oil world.  It usually has a rather small effect on the price that lasts a day or two.  The thing that would actually affect prices, pumping more oil, he always rejects on the same tired grounds:
Asked if it could ease prices by exporting more oil, he said customers were not asking for additional crude. “We are ready and willing to put more oil on the market, but you need a buyer,” he said.
There was one interesting new comment:
Speaking to reporters in the Qatari capital Doha, Mr Naimi said he wanted to “dispel this pessimism in the market” and the widespread fear that the world could see a repeat of 2008’s oil price increase which was a harbinger of the global recession.

“I think high prices are unjustified today [on] a supply-demand basis,” he said. “We really don’t understand why the prices are behaving the way they are.”

Supply was “much more firm today than in 2008” when crude rose to $147 a barrel, he said, with global supply now exceeding demand by 1m-2m barrels a day.
So he is now admitting that maybe supply was a little strained in 2008.  Of course back then he was making no such admission, but instead was making exactly the same excuses as today:
"A year ago prices were in the range of $ 65 a barrel; now, they are almost double that," Ali I. Al-Naimi told participants. "What has happened during this relatively short period of time? Between the second quarter of 2007 and the second quarter of 2008, global demand rose by an estimated 800,000 to 1.2 mm bpd, but at the same time global oil supplies rose between 1.4 and 1.6 mm bpd -- substantially more than the increase in demand. Accordingly, days of forward cover increased from roughly 52 to 54 days during the last 12 months, and inventory levels are currently well within their normal range."
The minister assured the world that Saudi Arabia -- and Saudi Aramco -- was ready to do whatever it could to calm the current situation.

"Given our current spare capacity, today I would like to state that for the remainder of this year Saudi Arabia is prepared and willing to produce additional barrels of crude oil above and beyond the 9.7 mm bpd, which we plan to produce during the month of July...
Of course, they never did produce any more - but he certainly didn't admit they couldn't.   Instead, it was the same story about customers not wanting any more oil:
...if demand for such quantities materializes and our customers tell us they are needed," he said, detailing the current round of megaprojects and the massive hydrocarbon increments they will bring to the marketplace.
You wouldn't expect a journalist to go look that up though, would you?


Adam Schuetzler said...

There may be some unreasonable speculation at work, but frankly we're so close to the hard limits that it's only natural speculation should be part of the mix, as are geopolitics, transport, and refining issues. My take on this is simple:

If this "speculation" had happened in 1995, would anyone have noticed or cared?

If "speculation" wasn't pushing up prices, then where would they be? Still over $100 a barrel for Brent?

I think there is likely to be another oil crisis this year, and it's becoming hard to head off. If there is an attack on Iran, that's game over, and I expect that to turn out much, much worse than anyone thinks now. If there isn't, we're STILL on our way to an oil shock... Not a happy prospect.

Alexander Ac said...

Not to mention that domestic SA oil consumption is increasing quite rapidly...

BTW, why would SA admit they have no (intention to pump more) oil, when they lie about the true amount of oil in the ground?

Now it appears there is "enough" oil, while "speculators" are to blame...

Fool me once, shame on you, fool me twice....