Pumping like there's no tomorrow (because there isn't)

Saudi Arabia Crude Production Rises to Highest in Three Decades

Bloomberg,

7 December, 2011

Saudi Arabia, the world’s biggest crude exporter, boosted output last month to the most in mo re than three decades to meet customer demand.

“We produced 10 million and 40 barrels in November because that’s what the customers wanted,” Ali al-Naimi said in an interview in Durban, South Africa, where he is attending a climate conference. That’s the highest level since at least 1980, according to data from the U.S. Energy Department. The desert nation pumped 9.4 million barrels a day in October, al- Naimi said on Nov. 20.

Saudi Arabia, the largest and most influential member of the Organization of Petroleum Exporting Countries, will meet with other members of the group on Dec. 14 in Vienna to set output targets for early 2012. The kingdom raised supply this year to make up for halted production in Libya and help prevent oil prices from surging.

Brent crude jumped to $127.02 in April as the armed rebellion to oust Muammar Qaddafi shuttered exports. It settled at $110.81 today.

“The market is balanced,” al-Naimi said. The kingdom is prepared to maintain supplies at November levels “if customers want the same thing in December,” he said.

Saudi Arabia produced 9.45 million barrels of oil a day in October, 9.4 million in September, and 9.8 million in August, according to the Paris-based International Energy Agency, which has not yet released its estimate for November.

The kingdom pumped 9.4 million barrels a day in November, unchanged from October and September levels, the U.S. Energy Department estimated in its Short-Term Energy Outlook published today in Washington.

Production Ceiling

OPEC will use its 2012 oil-demand forecast as a basis for discussion on the group’s production ceiling at the meeting next week, a person with knowledge of the group’s policy said, declining to be identified because the discussions are private and aren’t finalized.

OPEC last month forecast demand for its crude next year would reach 30 million barrels a day, minus production from Iraq, which has no quota. Its December forecast is scheduled for release Dec. 13, the day before the Vienna meeting.

OPEC has kept the combined quota for 11 of its 12 members at 24.845 million barrels a day since December 2008 even as most countries pump more than their allocations.

The 11 members with quotas produced 27.65 million barrels a day in November, with Iraq pumping 2.705 million barrels a day, according to Bloomberg estimates.

Outlook is ‘Good’

The outlook for demand next year “is good,” and if other OPEC members such as Libya and Iraq supply more, Saudi Arabia can adjust its production, al-Naimi said.

Asked whether he thinks supply to the market needs to be altered, al-Naimi replied: “Wait until we meet.”

The sizeable jump in production doesn’t seem plausible as output rebounds from Libya, and Iraq and Angola plan to add supply next year, according to BNP Paribas SA.

“We doubt that Saudi will risk over-supplying the market, thus we are circumspect as to the announced 10 million barrel-a- day number,” said Harry Tchilinguirian, BNP’s head of commodity markets strategy in London. “Equally, if you look at International Energy Agency estimates for Saudi production going back to 2000, the kingdom has never produced 10 million barrels a day, and under the current market circumstances, a sudden and large jump in production relative to October levels appears counter-intuitive.”

‘Well-Respected’

While the 10 million figure looks high, it should be taken at face value, said Michael Wittner, the head of oil-market research at Societe Generale SA in New York.

“Naimi is smart enough and experienced enough to know that when he isn’t qualifying an oil number it will be taken as the crude total,” he said. “He knows that what he says will be compared to the quota number, although quotas aren’t important at the moment. He’s well-respected for a reason.”

The IEA, an adviser to 28 industrialized consumer nations, reduced forecasts for global oil demand next year for a third month in November on weaker prospects for developed nations. Prices are high enough to pose a risk to the economy, the IEA’s Chief Economist Fatih Birol said Nov. 9.

Saudi Aramco raised premiums for all five blends that it will supply to Asia, its largest customer base, in January by $1.60 to $1.95 a barrel, the state-run oil company said in an e- mailed statement yesterday.

Aramco Selling Price

The increase in Aramco’s selling price to Asia hints at potential changes to the company’s strategy, Vienna-based consultant JBC Energy GmbH said today in a note to clients.

“Steep price hikes for the light end of the kingdom’s crude slate may be aimed at avoiding a potential supply glut,” JBC said. “The most benevolent interpretation is that the kingdom wants to ensure a no-cut decision at the upcoming OPEC meeting without ruffling too many feathers.”

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Oil ministers from several OPEC nations, including Iran and Angola, have said this week that oil supply and demand are in balance.