2011 April 17 Sunday
Saudis Cut Oil Production To Reduce Oversupply

We have too much $105 per barrel oil? (funny, I know) What to do? Cut supply. Make a virtue out of a necessity. Saudi Arabia’s Oil Minister Ali al- Naimi demonstrates his keen sense of wit.

“Our production in February was 9,125,100 barrels a day,” al-Naimi said, as he arrived in Kuwait for a conference. “In March, it was 8,292,100 barrels. It will probably go a little higher in April. The reason I mention these numbers is to show you the market is oversupplied.”

The US economy is at risk of falling back into a recession due to rapidly rising oil prices draining off so much consumer cash. Why isn't the claimed swing supplier (hint, it sits on a big peninsula next to a gulf) boosting oil production to prevent Peak Oil Recession #2? Recall that less than 2 months ago Saudi Arabia was dropping strong hints it would compensate for lost Libyan oil production by exporting more oil. Yet as Stuart Staniford points out, Saudi Arabia did not make up for lost Libyan oil and now the Saudis admit they actually cut production in March. Give that rapidly rising Saudi internal consumption is leaving less oil for exports and Saudi oil exports peaked in 2005 we can not expect Saudi Arabia to provide relief for high oil prices.

Robert Rapier actually sees a double dip recession as the optimistic scenario. He expects what he calls a Long Recession where the economy stagnates for several year. I think it is going to be more like the Long Depression. My advice: Lower your living standard before the lowering becomes unavoidable. Adjust to less oil before circumstances force that adjustment. If you make changes on your own schedule the changing will be much easier to do. Prepare for what's to come. The warning lights are flashing brighter. Change jobs, change dwellings, change your lifestyle before you have to.

Share |      By Randall Parker at 2011 April 17 04:47 PM  Economics Energy

red said at April 17, 2011 6:32 PM:

Everything I've read indicates oil is in over supply. Full refineries, hold tanks at capacity, ect. I believe where simply seeing the value of the dollar being destroyed reflected in oil prices.

not anon or anonymous said at April 18, 2011 8:03 AM:

This has nothing to do with the dollar, per se. The market is speculating that oil prices will be even higher in the future than they are now. The Saudis think the speculators are right, so they'd rather leave oil in the ground than extract it only for it to be stored in hold tanks, oil tanker ships and the like.

gcochran said at April 18, 2011 2:43 PM:

The money is nice, but the Saudis likely have another motive, one that would be obvious to a ten-year old, at least if the ten-year old was my kid.

no said at April 18, 2011 2:49 PM:

can you enlighten us lower IQ'd people gcochran?

Perhaps they are trying to manipulate the American election?

gcochran said at April 19, 2011 1:19 PM:

My suspicion is that the Saudis royals aren't really into this Arab Spring thing, and are unhappy with this Administration's response. How to get rid of them? A double dip might well do it.

Engineer-Poet said at April 23, 2011 12:13 PM:
Everything I've read indicates oil is in over supply. Full refineries, hold tanks at capacity, ect.
That's not oversupply, that's hedging against rising prices (which are guaranteed by production cutbacks until the economy collapses further).  Every barrel produced is still being sold even at $105.  A true oversupply situation would force prices down, as there would be an excess of supply over demand at the $105 price.

I'm looking into converting a vehicle to electric power and heating with wood next winter.  The way to deal with excessive oil prices is to give up oil as much as possible; if you can make that 100%, GREAT!  I think I might just be able to.

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