May 15, 2013: Another story supporting my thesis that the Saudis are increasing production in the face of adequate demand. CNBC is reporting:
The idea of an energy-independent United States-thanks to a revolution in the way North American shale is harvested-is reigniting vociferous debate about what it could mean for global markets, and especially the oil-rich Gulf states of the Arabian Peninsula.
"Reduced demand for oil from the US could undermine the oil price globally, thereby placing pressure on regional budgets which are increasingly reliant on the price of oil staying firm," Tim Fox, chief economist at Emirates NBD, Dubai's largest bank, explained to CNBC.
A downside pressure on prices would arguably come at an unfortunate time for countries like Saudi Arabia, still the world's top oil exporter, where government spending has risen in order to help keep the turmoil affecting the broader Middle East from hitting the country domestically. Saudi Arabia's budget is directly linked to the global price of oil.My thesis is this: the Saudis want to remind folks who the "big man on campus" is. They will increase production, putting pressure on Canadian oil sands. I think the Saudis are honest when they say they want a stable price for oil. Canadian oil selling at a huge discount is not a "stable oil price" in the eyes of the Saudis.
May 14, 2013: North American shale revolution is displacing OPEC. Bloomberg is reporting:
The U.S. shale boom will send “shockwaves” through the global oil trade over the next five years, benefiting the nation’s refiners and displacing OPEC as the driver of supply growth, the IEA said.
North America will provide 40 percent of new supplies to 2018 through the development of light, tight oil and oil sands, while the contribution from the Organization of Petroleum Exporting Countries will slip to 30 percent, according to the International Energy Agency. The IEA trimmed global fuel demand estimates for the next four years, and predicted that consumption in emerging economies may overtake developed nations this year.
“The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15,” the Paris-based adviser to 28 oil-consuming nations said in its medium-term market report today.
The development of U.S. shale resources, enabling the nation’s highest level of energy independence in two decades, is creating a “chain reaction” in the global transportation, processing and storage of oil that may escalate as other countries try to replicate the American oil boom, according to the IEA. Crude futures for settlement in 2018 are trading at a discount to current prices, signaling expectations for increasing supplies and constrained demand.
Two data points:
- OPEC increasing its production; at a five-month high.
- "Dollar is stronger than ever."
Time for a new poll. See linked story above.
But first the results of the current polls:
Should North Dakota charge a wind energy production tax:
- yes: 65%
- no: 35%
- in a long speech: 11%
- in a press conference: 11%
- through his press secretary: 8%
- through a press release: 70%
Now, the new poll: why do you think OPEC boosted output to a 5-month high? See linked story above.
The linked article suggests there is more than an adequate global supply of oil. Saudi says they increased output to ensure the price of oil remains stable. Japan is importing record amounts of oil ever since the nuclear accident. Japan is the 3rd biggest user of crude oil in the world; its 2012 increase in crude oil imports was the highest in nine (9) years. Some have opined that Saudi is increasing production in anticipation of the Syrian civil war spreading throughout the Mideast, disrupting the flow of oil exports. Others suggest that Canada is close to panic, not being able to get its Alberta oil to market; it already sells at a discount which questions whether continued production is economically feasible; increased OPEC output could be the death knell of Canadian oil sands; folks have suggested that OPEC is concerned about the North American oil/energy revolution.So, why do you think OPEC continues to increase oil production despite signs of adequate supply?
a) OPEC wants stable oil prices
b) OPEC needs the revenue
c) Saudi anticipates production interruption due to war
d) Japan's imports explain it
e) OPEC wants to hammer North American production
f) OPEC wants to show it still controls the price of oil