Saudi Arabian officials are conflicted as to whether or not they’re actually pumping more oil, or less oil, in response to the crisis in Libya.
They are certain they’re now going to pump less. Or, at least, not increase production even though prices are rising. Saudi Arabia intends to keep production at 12.5 million barrels a day, according to the latest reports.
They say there’s too much supply. Crude prices, which have risen significantly over the past two months, would suggest otherwise. It’s pretty clear that Saudi Arabia DID NOT make up for supply when the Libyan conflict erupted.
The WSJ.com’s James Herron has more on the confusion:
One Saudi official who did not wish to be named said the kingdom did indeed increase its production in February. The official explained that production averaged 9 million barrels a day that month because, “our output does change from one day to another.”
Other Saudi officials said prior to Mr. Al-Naimi’s comments that production increased by between 500,000 and 600,000 barrels a day at the end of February in response to the Libyan crisis. The kingdom subsequently reduced output by 500,000 barrels a day in mid-March, officials said, but only because of lack of demand for their oil, which is unsuitable for regular refiners of Libyan crude.
There’s one key answer. The oil story isn’t so simple as one country pumping more to make up for another. The crude oil that’s produced in Saudi Arabia is different than that produced in Libya and it requires a different type of refining facility.
So even if Saudi Arabia were pumping more oil, it wouldn’t fill the gap from Libya in the crude market. Hence the sharp and sustained rise in the crude market since the end of February, regardless of rumours about Saudi oil production.