Tuesday, May 9, 2017

More Problems For Saudi -- Summer Will Soon Be Here -- May 9, 2017

... and when summer returns, Saudi Arabians use more of their oil -- yes, oil -- to generate electricity to run their air conditioners.

... and this year, the spike in electricity will likely come earlier: the Muslim fasting month of Ramadan starts sooner, beginning in late May. The traditional big evening meals with family and friends to break the fast tend to create a surge in power demand.

This means that if Saudi Arabia keeps to its word to cut production, then it means it has less oil for its export customers.

When Saudi Arabia announced cuts last fall (2016), they assured their Asian customers that Saudi Arabia would shield them from any production cuts.

But now, with a perfect storm gathering (summer, production cuts), Saudi Arabia has told its Asian customers that it will reduce oil supplies to Asia by about 235,000 bopd.

Of course, the Reuters article does not tell us how much oil Saudi Arabia historically provides Asia, so without the denominator this is not particularly helpful.

Except. 235,000 bopd x $50 / bbl = $12 million / day in lost revenue.

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