World Needs Record Saudi Oil Supply as OPEC Convenes

Something is not making sense here. US and Canadian inventories are very high, and one hears almost daily about ships being unable to off-load in Europe because of full-tanks, so how can industrial nation's inventories be low??? China has been stockpiling like crazy.

I don't think it's a demand issue; one needs only look at how demand has fallen in the US. More likely people are speculating. Love to know what tanker inventories look like.

Iraqi Oil Minister Abdul Kareem al-Luaibi, center, answers questions at the 164th meeting of the Organization of Petroleum Exporting Countries conference in Vienna, on December 4, 2013 
 Photographer: Alexander Klein/AFP via Getty Images

By Grant Smith
9 June 2014

OPEC ministers say they will almost certainly leave their oil-production ceiling unchanged when the group meets this week. What really matters for markets is whether Saudi Arabia will respond to global supply shortfalls by pumping a record amount of crude.

Just six months ago, energy analysts predicted output from the Organization of Petroleum Exporting Countries would climb too high and Saudi Arabia needed to cut to make room for other suppliers. They changed their minds after production from Libya, Iran and Iraq failed to rebound as anticipated, and industrialized nations’ stockpiles fell to the lowest for the time of year since 2008. Saudi Arabia may need to pump a record 11 million barrels a day by December to cover the other member nations, says Energy Aspects Ltd., a consultant.

“Now it’s not whether the Saudis will make room, but whether they’ll keep it going and maintain enough spare capacity,” said Jamie Webster, a Washington-based analyst at IHS Inc., an industry researcher. “OPEC is increasingly having a hard time just doing its job of bringing all the barrels needed.”

Even as the North American shale revolution propels U.S. production to a three-decade peak, supply in other parts of the world is faltering. A battle for political control in Libya, pipeline attacks in Iraq and prolonged sanctions against Iran are preventing those nations from reviving output. While U.S. crude inventories rose to a record in April, restrictions on exports are keeping those supplies in the country, tempering forecasts that global oil prices will decline this year.

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