New Data Points Regarding the SPR Release -- Represented Only 11 Hours of Global Consumption

All updates regarding the SPR release will be found here: SPR Tapped, which for now is linked at the sidebar at the right. It won't stay there forever.

The AP story today has a number of data points, some of which I "predicted" earlier. (Note: I may have misinterpreted the story. From the story "IEA will actually release only about two-thirds of what was originally promised." I take this to be only about two-thirds of 60 million barrels, but I may be wrong on this. If this is clarified, I will correct the post. It won't change the crux of the story.)

1. This blog has consistently maintained that Saudi can't scale up to meet growing demand. From the AP story today:

Independent oil analysts say prices still could head lower this year. But some think IEA's announcement speaks volumes about its expectations for world oil supplies.

"I think it's an admission from them that Saudi Arabia might not be able to produce enough oil on its own" to meet increased world demand, analyst Stephen Schork said.

2. I posted that I doubted the full amount allowed to be released would actually be released.

Goldman Sachs also pointed out late last week that IEA will actually release only about two-thirds of what was originally promised.

Goldman analyst David Greely said about one-third of the 60 million barrels will come from limiting the amount that countries are required to keep in emergency supplies. 

I was right, but for the wrong reason. With American storage tanks full, I did not think that the American SPR would be tapped to full extent allowed. I never thought that folks would actually take SPR oil to store in off-shore tankers betting on higher prices by the end of the year.

3. I posted that I doubted countries around the world had enough oil in their SPRs to release as much as they were allowed (again, I interpret the story this way, but I could be wrong).

To repeat: Goldman analyst David Greely said about one-third of the 60 million barrels will come from limiting the amount that countries are required to keep in emergency supplies. 

4. With 60 million barrels representing 17 hours of global consumption, I posted that the release should have negligible effect on the price of oil.

Since the oil industry tends to keep much more on hand than what's required, Greely said that the new limits will have an "almost negligible impact on oil prices."

5. I found this interesting:

Barclays sees China, India, Saudi Arabia and Brazil as the main sources for demand growth.

Everyone knows that China and India will increase oil consumption. My hunch is that most folks are not aware that Saudi Arabia's demand has also increased, but this has been reported for the past couple of years (if not longer). Brazil is a bit of a surprise to me. I see Brazil as a country with a growing economy, but not to the extent that it would be put in the China/India equation. Further, with Brazil developing its own oil resources, I thought their demand/supply would be a wash.

6. But the opening paragraph of this story is completely ludicrous:

Some major investment banks are still betting that oil prices will grow next year despite an emergency injection of crude on world markets from the U.S. and other countries.

The emergency injection represents 17 hours of global consumption. If spread out over time, one could get sixty days of additional supply (one million bbls for next sixty days), and if the world only needed a half million bbls/day, "they" could stretch it out 120 days, but even that barely gets us to the new year.

By the way, that "17 hours of global consumption" was based on the full 60 million bbls being released. As noted in the story above, it is estimated that only two-thirds of the 60 million will be released, about 40 million barrels, about 11 hours of global consumption.