Saudi Arabia's Production Surges -- Up 0.1% -- May 12, 2015

Update

May 13, 2015: talk about prescient / timely. I posted the note below later last night. This morning, over at CNBC, EIA is reporting that US shale industry "blinked." Somewhat unconvincing argument. 
 

Original Post

Note: I'm always a bit nervous when I post these meanderings. There may be huge errors. This is to help me put things into perspective. Don't quote me on any of this stuff. In fact, it's probably advisable to ignore this post. 

As we will see in a few moments, it's hard to get a reliable number for a) the amount of oil Saudi Arabia produces on a daily basis; and, b) how much of that production is exported.

These numbers are probably not all that reliable, and they are certainly out of date but wiki reports:

Saudi Arabia produced 10.3 million barrels per day in 1980, 10.6 Mbbl/d in 2006, and "about" 9.2 million bopd in 2008. The country announced plans to increase this capacity to 12.5 million bopd by 2009. (I remember that figure, not 12.5 exactly, but the figure of around 12 million bopd was forecast back then.)

Also according to wiki, Saudi crude oil production has varied from as low as 8.25 million barrels per day (average for 2009) up to 9.83 million barrels per day (average for 2012). Overall, in the nine years since 2004 (2005-2013), Saudi crude oil and lease condensate production has averaged 9.20 million barrels per day, just slightly higher than 2004 levels.

Now, we get this, Bloomberg at Rigzone reporting:

Saudi Arabia boosted crude oil production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. supply growth showed signs of slowing. The Middle Eastern country increased crude output by 13,700 barrels a day in April to 10.308 million, according to data the country communicated to the Organization of Petroleum Exporting Countries’ secretariat in Vienna.

OMG! "To the highest level in at least three decades." Except maybe in 2006 when maybe they produced even more. 

On the other hand, from outside sources:

OPEC’s data compiled from external sources showed Saudi Arabian output of 10.095 million barrels a day in April, lower than the figure directly communicated from the nation. The kingdom’s output was 10.069 million barrels a day in March, according to these figures, which OPEC describes as being compiled from “secondary sources.”

This all seems to be a "war" of words. There is not a whole lot of difference (at least in my mind) between 10.31 million bopd and 10.07 million bopd when one recalls that Saudi Arabia at one time announced plans to increase their production to over 12 million bopd.

[The difference between 10.069 million and 10.095 million bbls is 0.3% --  hardly worth getting excited about -- since these are all "wags" anyway.]

Saudi Arabia's number of 13,700 bbls represents 0.1% of 10.3 million bbls. Is that correct? Only 0.1%. Let's see, checking, 0.001 x 10,300,000 = 10,000 bbls. Okay, close enough.

So, this is a headline? Saudi Arabia boosted crude oil production for a second month to the highest level in at least three decades.

Wiki said the "number" was 10.6 million bopd back in 2006. As noted, the numbers are unreliable for a number of reasons and then there's the question of whether one is measuring crude oil only or also associated condensates. Whatever. The increase seems unremarkable when looking at the collapse in oil prices.

Can anyone really get excited about this? Last August before Saudi made their famous announcement, Saudi oil imports into the US about 28 million bbls/month; in February (most recent data), 26 million bbls/month:

Which brings us to the second story. At the linked article, an analyst had this to say:

“The Saudis must be content that their policy of protecting their market share has worked so well and prices did not stay below $50 for long,” said Christopher Bellew, senior broker at Jefferies International Ltd. in London. “They held their nerve and now see a stable market with their share preserved.” 

Really? Six months in the history of the oil and gas industry is hardly very long.  Graphically, the story looks even more unremarkable.

The EIA estimates that US shale production will decrease by 86,000 bopd in April, which is a much bigger decrease than the paltry 13,700 bopd Saudi Arabian increase.

I think the whole increase (Saudi) / decrease (US shale) is trivial -- up to this point.

The whole thing is "manipulated." I miss the days of blaming the price of oil on "speculators." Joking. The mainstream media only mentions speculators when the price of oil rises "too high too fast" and I don't want to see that.

Anyway, I often make simple arithmetic errors. That 0.1% above may be an error. Maybe I misread something, but if the increase truly is 13,700 bopd on 10 million bopd and if that truly works out to about 0.1%, it seems a lot of talk about something pretty trivial. Shoot, I think Libyan exports are down to around 300,000 bopd when they could easily be over a million. Don't quote me on that; it's been a long time since I looked at Libyan exports. Speaking of which, I think Iraqi exports have fallen significantly also. But now I'm rambling.

Time to move on.

Two last non sequiturs:

• oil doesn't spoil with age
• all oil produced is eventually sold/refined 

One last thought: some have opined that Saudi took their action not against shale fracking but against the surging solar and wind industry worldwide. In fact, it's probably all about Iran.

"Futures" suggest it could be a nice day tomorrow.