Possibly Disturbing Trend in Saudi Arabia. Anybody Have Thoughts?

[Bob Kohm]

I've been thinking a lot about this since the news of the Saudi's massively ramping up exports to the US broke last month. Give this a read (scroll down to the Saudi Arabia part)...

http://www.informationdissemination.net/2012/04/april-6-observations.html

Can anybody come up with reasonable explanations other than the one reached by the author?

[Fresno Bob]

refill our strategic stockpile?

[Bob Kohm]

refill our strategic stockpile?

To the best of my knowledge it hasn't really been emptied; has it been? Also, why would the Saudis deplete their own to refill ours if it has been?

The interesting thing about the concept of the strategic stockpile is that I don't think that we have anything like the refining capacity to handle the amount of oil coming our way on the VLCCs-- the Saudis might be looking for us to safeguard oil or are for some reason intentionally creating a huge glut of unrefined crude oil in North America. Makes me wonder.

[chancellor]

Hmmm...number of notes here:

- The Saudis have been putting in projects to increase production capacity for the last three years - they're probably actually putting them into implementation now.
- As noted, their offshore terminals are full. This might put a dent in their offshore facilities, but with the added production capability, not what's implied in the article.
- The Saudis hold at least 12.5 million barrels in country. Linky: http://www.saudiaramcoworld.com/issu...o.at.sixty.htm
- Same reference above - even before their production projects, they've been able to ramp up capacity by over 2-3 million barrels per day previously.
- They've also had a huge recent find that boosts their reserves to above what was believed in 1990.

Now, all that being said, it's not much of a push for them to ramp up capacity, especially for the short term. The infrastructure is there, the capacity exists, and their ability to tap offshore terminals is solid. But why? Well, here's for speculating...

- Cashing in on high oil prices while keeping prices from skyrocketing. It's pretty easy to consider this a positive speculation - the Saudis have had recent turnover in the royal family, Bahrain is somewhat unstable and requiring fiscal outlays, and Yemen is still highly unstable. Plus, they're smart enough to realize that somewhat high oil prices are good, but really high oil prices will lead to more worldwide economic downturns, causing a potentially rapid crash in prices. That happened a few years ago, and the Saudis were caught with their pants down - it created a fair amount of unrest in the country as the Saudis cut some of their benefits to citizens.
- Part of the above, plus a quiet agreement for the Saudis to pump more oil in exchange for our assistance in keeping Yemen quiet.
- There's dissonance among the oil manufacturers again, and the Saudis are reminding everyone who the big dog is. They've done it before, so it can't be ruled out in entirety. But there's been little inkling of that being an issue.
- I'm sure some on the right will point to this as craven Obama adminstration backroom dealing running up to the election. There actually is some excess refining capacity out there if the administration is willing to back down on upcoming Clean Air standards. If these refineries suddenly re-open - especially the one in the Carribean - this might be merited. Hell, I'd give them credit if the administration was actually smart enough to pull it off.
- The Arabs have finally decided to put a populus tremuloidis stake into Assad, and the Saudis will, as usual, foot most of the bill. Ergo, they need to move some extra oil for cash.

[JudeBaldo]

I've been thinking a lot about this since the news of the Saudi's massively ramping up exports to the US broke last month. Give this a read (scroll down to the Saudi Arabia part)...

http://www.informationdissemination.net/2012/04/april-6-observations.html

Can anybody come up with reasonable explanations other than the one reached by the author?

I don't think anyone, even the NorKo's have an appetite for war. This is precautionary and to cash-in on crude prices without stuffing the market and getting rapid deflation.