Posted on 08/14/2008 9:32:40 PM PDT by bruinbirdman
Opec last month pushed its production to the highest level in its 48-year history even as demand was slipping in the US and Europe, the International Energy Agency (IEA) said on Tuesday.
The combination of surplus supply and weaker demand has pushed oil prices to $113.50 a barrel, down 24 per cent in the past month and the lowest level since late April.
The effort was led by Saudi Arabia, which had come under increasing pressure for doing too little to compensate for lower supplies from countries outside Opec, where growth has been lacklustre as fields have aged in countries such as the UK and Mexico.
In mid-June, as oil inventories were running low, King Abdullah called a high-level international meeting in Jeddah and pledged to help reduce record prices by increasing Saudi production from 9.4m barrels a day to 9.7m b/d, the highest level in 30 years.
The market brushed aside the pledge, sceptical of whether the kingdom would make good on its promise and instead worried about supply outages in Nigeria. The oil price steadily climbed from just below $140 a barrel on the day of the meeting to $147.27 in July.
Tuesday’s preliminary data of Saudi shipments proved sceptics were both right and wrong. According to the IEA, Saudi Arabia did increase its production but not to the degree promised. In July, despite Saudi officials worrying about the impact the slowing economy and high petrol prices were already having on US driving habits, Saudi Arabia increased its output to 9.55m b/d, up 100,000, Tuesday’s report said.
The Saudi increase, which could still prove to have been more generous as new shipping data are collected, coupled with higher volumes from Iran, helped push the 13-member group’s total output to 32.8m barrels a day and the oil price to $114 a barrel.
Opec’s output in July was about 1m b/d higher than in April and significantly higher than the 31.1m b/d in the same month of last year.
Whether Saudi Arabia and Opec will continue to work to reduce prices, or revert to keeping supplies off the market now that prices have fallen, will become clearer at the cartel’s next meeting on September 9 in Vienna.
Opec’s production increase was not the only reason oil prices fell; demand curtailed by economic slowdown and high oil prices had also played a critical role, the IEA said.
The IEA cut its global oil demand growth to 790,000 barrels a day, down from July’s estimate of 890,000 b/d. Some of the demand in rich countries will be lost for ever, it noted, saying: “Even if retail prices ease, it seems unlikely that motorists who have purchased smaller cars will revert to gas-guzzling vehicles.”
But demand growth in emerging countries remained strong, with Chinese consumption rising above 8m b/d for the first time in June, hitting 8.3m b/d.
The market is split about the direction of crude oil prices, but the previous general bullish sentiment is cracking.
The IEA called it “too early to cite definitively a sea change in the market”.
Petro-ping.
The US as a whole could produce more oil than OPEC if Congress would let the companies do so.
They can read the writing on the wall. Once we start drilling on American soil, they have lost us as their biggest customer. Greed is a terrible thing. It has a way of coming back and biting you in the a**! Thank God they did get greedy. Had they not done it, we would have kept on going just like we have been because of the wacky liberal environ_mental_ists. Thanks, OPEC! You actually did us a favor! :o)
OPEC Hates the Ruskies and will increase out if the Bear is on the Move.
So...who is addicted to oil?
This is why we can’t kick the foreign oil habit. OPEC plays us like a fine tuned Stradivarius. When oil prices soar, they make a killing. But they can’t afford to leave them there too long or we will develop domestic sources such as shale and develop alternative energy sources. So oil prices are like a yo-yo, going up long enough to make a windfall profit, and coming down soon enough that energy companies fear developing new domestic sources that have no business case with oil under $60/bbl.
We need the government to put a floor on the price of oil. Put a floor at $60 and encourage US energy companies to produce whatever is viable selling at a fixed minimum prices of $60/bbl. Pending that, we will be dependent for a large share of our oil from OPEC, and they will continue to play us for the fools we are like a fine tuned instrument.
This isn’t rocket science.
Then again, oil is going back to $50 eventually and so long as we don’t mind funding middle east terrorists, I am sure the US people will be A-OK with a return to $2.45/gallon gas. As far as I’m concerned, that’s OK with me, just so long as energy stays relatively cheap.
But when oil comes back to $50/gallon, watch how fast everybody jumps off the alternative energy bandwagon and conveniently forgets all about our “dependence” on foreign oil. SUVs will be selling in short order.
Still, now might be a REALLY good time to start building some refineries that can refine high-sulfer crude. Domestic oil or not, we are going to need those.
Proof too fast... Meant $50/bbl, obviously.
Of course...
If America drills...the party is over...
That’s why production is up. These people are terrified of the Drill now movement. If they produce now and the prices at the pump fall below say $3.50 they hope energy will be off the table in the fall and the haloed one can win. Once the Dems are secure and the no drilling crowd is back in charge then OPEC cuts production and up go the prices the way the haloed one’s interview told us he wanted it.
Good point.
Talking about the off possibility of extracting our own oil has OPEC producing like never before - yet we are told to believe that drilling here and now won’t accomplish anything.
Thanks
That should have been
OPEC (Saudi Arabia) Hates the Ruskies and will increase output if the Bear is on the Move.
They want to kill off political support for American domestic exploration. These are enormous investments - with a slim profit margin, uncertainty in the underlying market price will shift investment to other (more profitable, or less risky) areas. OPEC will do everything it can to control the global oil supply, including these sorts of transparent supply manipulations. Every other source that joins the market is a threat to the Oil Weapon. The more diverse the supply, the better off we all are (save for OPEC).
The interesting thing I’ve seen here in Ohio is that as the price per barrel has continued to drop, the actual price at the pump has crept back up about 8 cents a gallon. Might be strictly anecdotal, but I get the feeling the retailers don’t want us to get back under $3.50 a gallon.
The Saudis upped their production, but of what? Probably heavy, high sulfur stuff that no one wants. It’ll sit there in tankers unsold.
Yes, we need production here and in friendly environs, but we could also use some refineries that can make stinky goop into something useful. There’s a lot of it around, and we might be able to get it cheap sooner than we’ll get any of our stuff out of the ground.
Gasoline prices are still too high.
“They want to kill off political support for American domestic exploration.”
Before the election.
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