by Kate Mackenzie | Share
One of the big questions as oil prices hover above $80 — prompting all kinds of concerns – is what Saudi Arabia will do.
The country’s oil minister, Ali al-Naimi, has been talking up the price range of $70 - $80 for many months now, declaring it to be ‘beautiful’ and ‘perfect’. Saudi Arabia is the only country with significant spare production capacity, and it’s also very alert to the risk of high prices destroying demand.
Well, it seems to be* walking the talk. Surveys of Opec output for April show that Saudi went substantially above its own production quota level - this from the country that often produces less than its quota, to compensate for its fellow Opec members’ transgressions.
From Bloomberg’s survey of oil companies, producers and analysts:
Saudi Arabia, the group’s biggest producer, bolstered output by 60,000 barrels to 8.26 million barrels a day, the highest level since December 2008. It was the largest increase of any member. The kingdom exceeded its quota by 209,000 barrels a day.
And from Reuters‘ survey, a similar figure:
Saudi Arabia, OPEC’s top producer, nudged supply up to 8.25 million bpd, the survey found, reflecting increased crude oil use in power plants. One source estimated the increase in Saudi supply at 100,000 bpd.
So, despite the non-committal tone of the latest Opec monthly report said, Saudi Arabia does seems to be concerned, as well, that prices are too high.
But whether that will actually affect prices is another question.
Analysts are increasingly expressing the view that current crude oil prices are driven by investors more than fundamentals; Paul Tossetti of PFC Energy and Oppenheimer’s Fadel Gheit, to name a couple.
[*There are dissenting views, however - JBC Energy for example estimates the Opec output actually fell in April, adding: "our view of a monthly crude output decline is supported by lower OPEC export estimates from tanker shipment tracker Oil Movements, as well as by seasonally weaker demand in Q2 and legitimate fears of further stockbuilds".]