Posted on 03/02/2009 10:04:22 AM PST by thackney
Saudi Arabia, the world's largest oil exporter, is expected to cut the number of oil rigs by as much as 20% until year-end amid lower crude output, people familiar with the situation said.
Last year, Saudi Arabian Oil Co., or Saudi Aramco, the state-run oil company, had about 130 offshore and onshore rigs in operation at peak times, a number that is set to fall by up to a fifth throughout 2009, the people said.
"They haven't announced any specifics but they are saying there will be a reduction in the number of rigs by 20%," one Gulf-based oil industry official told Zawya Dow Jones.
Aramco has been expanding its drilling rig fleet in the past few years as part of plans to boost its oil production capacity amid rising energy demand. However, the global economic crisis has led to falling rig requirements as global oil demand has weakened and major oil expansion projects are being completed.
"Given the slowdown in oil production this year and the completion of major oil expansion projects, it is not surprising to see an easing of drilling activity," said Raja Kiwan, an analyst at PFC Energy.
"But this will be temporary before work begins on the next slate of oil and gas projects," Kiwan said.
According to the International Energy Agency, global oil demand is expected to drop by 1.2% this year, the biggest annual drop in 27 years, as the world's major consuming nations have fallen into recession and growth in Asia, notably in China, has weakened.
REDUCED ACTIVITY
The Organization of Petroleum Exporting Countries, led by Saudi Arabia, has announced three production cuts since September to remove a total 4.2 million barrels a day of crude from the market in a bid to boost oil prices, which have slumped to below $40 a barrel, from a record $147 a barrel in July, due to deteriorating demand.
And so it is that we come BACK to the issue of domestic drilling
Free market conservation ...
No, we are simply showing the cause and effect of the law of Supply and Demand. As drilling can no longer support itself because of profit/loss fundamentals, (And no Government manipulation of either.) the drop in supply will bring the demand back up along with the price. Add extra taxes recently imposed, there you have it.
I agree dropping supply will bring price back up. But how does dropping supply bring up demand?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.