Saudi Arabia wants higher oil prices. Really.
At least, that’s what its oil minister has been saying in recent interviews in the US and Europe.
But higher oil prices require a higher world demand for oil, a lower supply of oil, or a combination of both.
The trouble is that Saudi Arabia doesn’t control the world demand for oil, which is growing at a slow pace, tracking a weak global economy.
In fact, the Kingdom has been pumping more oil to ease short-term oilshortages, together with other Middle East producers, according to an IEA report released yesterday.
Here are a couple of highlights from the IEA report:
· Global oil supplies rose by 0.6 mb/d in June to 96 mb/d after outages curbed OPEC and non-OPEC supplies in May. World production was 750 kb/d below last year as higher OPEC output only partially offset non-OPEC declines. Non-OPEC supplies are set to drop by 0.9 mb/d in 2016, to 56.5 mb/d, before rising 0.2 mb/d in 2017.
· OPEC crude output rose by 400 kb/d in June to an eight-year high of 33.21 mb/d, including newly re-joined Gabon. Saudi Arabia ramped up to a near-record rate of 10.45 mb/d(our italics) and Nigerian flows partially recovered from rebel attacks. Middle East producers sustained record levels, building market share and pushing OPEC’s total output 510 kb/d above a year ago.
· OECD commercial inventories built by 13.5 mb in May to end the month at a record 3 074 mb. Preliminary information for June suggests that OECD stocks added a further 0.9 mb while floating storage has continued to build, reaching its highest level since 2009.
That could explain why oil prices headed back to $45 after trading briefly above $50.