OPEC Stand Off As Saudi Arabia Tries To Help Obama's Reelection Chances By Hiking Crude Output; Iran, Venezuela, Iraq Not Convinced

Tyler Durden's picture

Contrary to ongoing wideranging skepticism, Saudi Arabia continues to posture that not only does it have substantial excess capacity, but that it will bring it online any... minute...now. After all, Saudi owes the US a big favor (i.e., lower gas prices) in exchange for America's (or rather its Fifth Fleet) continued presence in Bahrain, which even those living in a cave know has been under a full media blackout to keep the ongoing religious tensions under wraps and keep the Saudi-Bahrain border safe (not to mention the Ghawar oil field). So even as Saudi had promised to hike its output as Libyian production went offline only for it to be discovered that the country had in fact lowered production, so now too the song and dance has hit fever pitch. Reuters reports that "Saudi Arabia is planning to lift oil output sharply in June, whatever policy OPEC adopts this week, in an effort to rein in high fuel prices. Riyadh expects to lift production by more than 500,000 barrels a day in June to its highest for three years, a senior Gulf industry official familiar with Saudi oil policy told Reuters." We can't wait to hear how Saudi's unilateral plan to boost Obama's reelection chances is met by other OPEC members such as Iran, Venezuela, Iraq and Libya. "Worried about the impact on economic growth of
inflated energy costs, Saudi will act alone if necessary to keep a lid
on prices now at $114 a barrel for benchmark Brent crude." Wait, isn't OPEC a "cartel", or a place where unilateral decisions are not allowed, for precisely this reason? Of course, at the end of the day, with recent Wikileaks disclosure that Saudi Arabia admitted it has overstated its reserves by some 300 billion barrels, or 40% of total, this latest ploy to push gasoline prices lower into the summer season will have a half life that is shorter than the SNB's FX intervention attempts.

From Reuters:

The biggest producer in the Organization of the Petroleum Exporting Countries, Saudi wants the cartel to lift formal output limits at a meeting on Wednesday to show consumer countries that it sees the danger to the economy of runaway oil prices.

So far it only has the support of its Gulf Arab allies Kuwait and the United Arab Emirates among the 12-member cartel.

"I expect OPEC to increase output during this meeting but I am still unsure how much," Kuwaiti Oil Minister Mohammad al-Busairi told Reuters.

"The market will be tight," said UAE Oil Minister Dhaen al-Hamli.

 Riyadh's production intentions may overshadow an OPEC meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits.

The Gulf producers want, at least, to close the 1.4 million bpd gap between OPEC's two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by OPEC in April at 26.2 million.

"There is a need for more supply in the market," said Kuwait's al-Busairi. "I expect demand to be strong in the third and fourth quarter, the demand will mainly come from Asia."

There is strong opposition to any production increase from price hawks Iran and Venezuela, with most neutral countries yet to show their hand.

One of them, Iraq, said it was happy with the market as it stands.

"In my opinion the current level is not too high," said Iraqi Oil Minister Abdul-Kareem Luaibi of $114 Brent. "Recent indications from the oil market as far as the stocks and supplies is good -- there is good supply."


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Internet Tough Guy's picture

They certainly have you over a barrel, Mr. western oil importer. Do you have one hump or two?

Alcoholic Native American's picture

For your information, I don't even drive.  I bike everywhere.  I'm smug like that.

mickeyman's picture

Naturally you don't use any asphalt roads when you cycle. You go cross country.

Ahmeexnal's picture

And your bike's tires are made of fucking wood?
And you ride on golden roads instead of asphalted ones?

JW n FL's picture

he uses water to lubricate the chain and sprocket!

he uses gold handle bar grips!

he wears natural fiber hemp when biking.. the seat is made of silver, as to not communicate bacteria / viruses.


that has got to chaffe his ass! all the time!

camaro68ss's picture

o man you guys make me lol

LawsofPhysics's picture

Energy independence will come to America one way or another.  That "deal" that was forced upon the middle east in the 70's by the baby boomers can no longer be enforced and is coming to an end.  Just wait until oil is no longer priced in dollars.  If you have not already hedged accordingly, it may be too late to do so.

TruthInSunshine's picture

Obama's new re-election campaign slogan for 2012:

'$1.79 per gallon gas and $55 per hour, 9-4 government jobs as cartographers with full bennies and a full pension at 52 for those who didn't get any of the Hope or Change. I pinky promise swear. 4 more years?'

css1971's picture

I for one aplaud Saudi's decision. Bravo! Bravo! <claps enthusiastically>

I'm looking forward to purchasing oil and other commodities at temporarily bargain basement prices.

God I love politics and politicians. Don't get me wrong, I hold both in utter contempt, but they are just so predictable.


Flakmeister's picture

Jawboning at its finest... I think the Fed took the PR course offered at KSA-U

trav7777's picture

concur 100%....jawboning or surge production in heavy sour

e1618978's picture

OPEC only really matters when the price is low, they can cheat all they like at $100/barrel. 

Spastica Rex's picture

Saudi Arabia Tries To Help Obama's Reelection Chances

Do the Saudis prefer the Democrats? Is there a possible American president who won't do what they want?

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yeah, the Israeli run U. S. Government is doing what the Saudis want. Ha, ha.  Hell, we might as well move our nation's capital to Tel Aviv!



Spastica Rex's picture

I hear you, but the interests of Israel and the House of Saud don't seem to be too much in conflict at the present moment.

Wasn't it Donald Trump who said something like, "If I'm president, I'll just go take all our oil lying under the ragheads' sand, darn tootin' I will!"

Not a possible president.



Problem Is's picture

Obama Bin Lyin' bowed down to King Abdulla...

A harlot like Palin McMILF can be bought any day with sovereign wealth fund expenditures like so many concubines...

Ditto the eunuch Willard Romney...

DaveyJones's picture

"Iraq is not convinced" of a lot of things

hedgeless_horseman's picture

Et vous, le Canada?

Total Imports of Petroleum (Top 15 Countries)
(Thousand Barrels per Day) Country Mar-11 Feb-11 YTD 2011 Mar-10 YTD 2010 CANADA 2,666 2,831 2,773 2,517 2,535 MEXICO 1,319 1,104 1,269 1,265 1,178 SAUDI ARABIA 1,108 1,114 1,108 1,149 1,007 VENEZUELA 1,067 989 1,030 1,061 993 NIGERIA 913 978 966 962 970 RUSSIA 690 437 556 488 459 ALGERIA 500 394 489 455 472 COLOMBIA 399 211 318 251 318 IRAQ 382 263 375 475 506 ANGOLA 280 370 320 502 371 UNITED KINGDOM 197 110 155 267 318 BRAZIL 161 177 205 302 296 KUWAIT 161 118 143 218 173 NORWAY 156 69 104 59 94 VIRGIN ISLANDS 149 182 203 228 243



mayhem_korner's picture

Is there a reason the U.S.'s 9M bbl/day is not on this chart?

hedgeless_horseman's picture

It is a list of exporters to the US.

Canada remained the largest exporter of total petroleum in March, exporting 2,666 thousand barrels per day to the United States, which is a decrease from last month (2,831 thousand barrels per day). The second largest exporter of total petroleum was Mexico with 1,319 thousand barrels per day.


magis00's picture

It's really cute that Venezuala is 4th.

hedgeless_horseman's picture

At $100/bbl, just add two zeros to the data and my guess is that this chart becomes a pretty good approximation of the top importers of US Dollars, and thus inflation, less China and Japan.

What is Hugo doing with all of those US Dollars? 

Also, someone please direct me to the country on this list that is doing so well that it is not already maximizing production, and thus income.

trav7777's picture

we don't produce 9mbpd and haven't for like 30 years...we're around 6 now

Cheeky Bastard's picture

Virgin Islands? I presume they're in this select group because of all the trading companies set up there to move the crude from REAL producers?

JW n FL's picture

Shhhhhhhh..... we dont discuss off shore irrevocable trusts in mixed company Cheeky.. really, you know better.

hedgeless_horseman's picture

St. Croix is home to HOVENSA, one of the world's largest oil refineries.  This chart is for total petroleum imports, which includes gasoline.


Kevin... Who suffers from Cassandras curse's picture

If you go to the site, at the bottom you will find this, which he didn't put in.

mayhem_korner's picture

When should we expect the next "reducing our dependence on foreign oil" speech, Mr. Prezident, sir?

RobotTrader's picture

Gasoline prices have totally collapsed in L.A. from $4.40 to $3.79/gal.

Peak Oil nowhere to be found, 4 years after we heard:

"John, I've ready 281 books on Peak Oil, and I can assure you....."

"Every quarter, we get a new report like the BP Statistical Review that says....."

"Production is declining, car sales in China are booming....."

"Soon, we will have gas lines, rationing, etc........."

"Within 90 days, a big gooey blob in the Gulf of Mexico will land ashore and ruin thousands of miles of coastline....."



Idiot Savant's picture

Now you're just being a dick, RT.

Gasoline prices have totally collapsed in L.A. from $4.40 to $3.79/gal.

Congratulations, you've been conditioned by big oil, much like Pavlov's dogs, and now perceive $3.79 to be a collapse.

Peak Oil nowhere to be found - Right, BP is drilling a mile under the ocean surface, and then an additional three to five miles into the crust, because the world is awash in easily retrievable oil. /sarc/

"Within 90 days, a big gooey blob in the Gulf of Mexico will land ashore and ruin thousands of miles of coastline....."

Would have happened if it wasn't for the hundreds of thousands of gallons of Corexit dumped in the gulf. We won't know the effects of these chemicals on the ecosystem for years to come.

MisterMousePotato's picture

I agree with your other points; however, this?:

"Right, BP is drilling a mile under the ocean surface, and then an additional three to five miles into the crust, because the world is awash in easily retrievable oil. /sarc/"

If you read ZeroHedge, then surely you know why BP is/was drilling where it is/was? The reasons are more an outgrowth of (bad) politics than geology.

Idiot Savant's picture

The reasons are more an outgrowth of (bad) politics than geology.

I'm an avid ZH reader, but am unaware of the politics involved in with the DH. A link or explanation would be appreciated.

I thought it was about new reserves, profit, and tapping the Tiber oil field.

Flakmeister's picture

Umm, so what was the politics that made them drill the Macondo? I suggest you read up on a project called Thunderhorse and how it performed.

101 years and counting's picture

it's ZH's stance that the economy is in the toilets...yet oil demand is surging.  ROFL.


rdenner's picture

Every time that the economy surges, oil prices sky rocket.. There is no more spare capacity that OPEC or anyone else can deliver. Now whether that is Peak Oil or an unwillingness of those holding oil to sell at the low prices(sub 100) is of little consequence.. The reality is that it sows its own demise... Economy heats up, prices rise and hits a ceiling as production does not ramp up to meet demand... Demand crosses supply and we have a pricing disconnect... This causes the economy to sputter and reverse into recession.. Oil prices dislocate to the downside setting up another recovery... This is happening on a faster and faster cycle.. we are now cycling in and out of recessions on a nearly 12 month schedule and it is compressing even more as we speak.



css1971's picture


God damn it. Don't tell everyone. I'm making 50% pa on this.


MachoMan's picture

It's not an economy surging, it's the flogging of the dead economic horse via concentrated stimulative efforts (dishonest at best) to club members...  dollar devaluation and fear of dollar devaluation (outpacing demand) causes oil to increase in price per dollar...  but yes, to the extent the economy would organically heat up, the price of oil provides a hard ceiling.

DaveyJones's picture

we're like hamsters really except they're not as stupid 

Ace Ventura's picture

LOL! Great, now I've got copious amounts of nose-spewed water to clean off the monitor!

Nominate for best comment on this thread!

Cheeky Bastard's picture

China demand offsets the decline in western economies. It is now the largest energy consumer in the world, and consumes more bpd than US did at it's peak in late '07. You know, USA is not the only fucking economy on the planet.

DaveyJones's picture

but we like to pretend we are. We have big guns too. Welcome back Cheeky hope you're feeling well.