Category: oil price

The Economist | Saudi Oil: Down (just a bit) with the price

The Saudis are worried that high prices are hurting the world’s economy
Oct 6th 2012 | DAMMAM | from the print edition

CRANES loom over the landscape in Dammam, a sprawling port city on Saudi Arabia’s Gulf coast. Shiny shopping malls are rising. Flashy cars stream across the causeway towards Bahrain and its nightlife. Young Saudis are making the most of their kingdom’s latest oil boom.

In a compound up the road in Dhahran sits Saudi Aramco, the world’s largest exporter of crude oil and the source of the country’s flourishing finances. Oil prices have averaged about $110 a barrel this year and for months Aramco has been pumping around 10m barrels a day (b/d), one of its highest rates. The Energy Information Administration, the American energy department’s statistical arm, says Saudi Arabia’s net oil income in 2011 was $311 billion. Prices were lower then; this year the country will earn even more. (…)

Read the rest of my piece here.

Oil at $100 = another correction on the way

Investment banks reckon we’re in for it. Opec says it’s happy where things are. China’s oil demand last year was 17.5% higher than the year before.

This is dangerous and short-sighted. In countries like the US and UK, fuel costs are within spitting distance of the records set in 2008, when a big wave of demand destruction spread across the West.

Inflation in China, which prompted two interest-rate rises in Q4 last year, is worrying the government. Another effort to dampen growth can’t be far off. The Fed may end quantitative easing if the US economy picks up, as data on Friday is expected to show it has. That will strengthen the dollar and drive down oil prices.

And the premium Brent (about $98/b) is enjoying to WTI (about $88/b) means we’re in for some kind of correction, soon. Expect a flattening of the contango and a dip in prices back under $80/b, if not lower. And expect the IEA to revise its demand outlooks back down again. Demand destruction, part 2, is on its way.

Update: Saudi oil minister Ali Naimi said today he’s worried about speculators again. No doubt. It’s 2008 all over again.

Update 2: I’ll be interviewing Opec’s Sec-General Abdallah El-Badri next week. Nice guy, always a good interview, always insightful, and with a lot on his plate at the minute.