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Crude Prices 'Spike' Despite Saudis Increasing 'Surge' Production

Tyler Durden's picture




 

As Barclays recently noted, there is a complete decoupling between futures and physical markets for crude oil and nowhere is that more evident than the high volume spike in crude that just happened after Saudi Arabia boosted crude production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. growth showed signs of slowing.

 

As Bloomberg reports,

Saudi Arabia boosted crude production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. growth showed signs of slowing.

 

The Middle Eastern country increased daily crude output by 13,700 barrels in April to an average of 10.308 million, according to data the country communicated to the Organization of Petroleum Exporting Countries’ secretariat in Vienna.

 

Prices collapsed by almost half last year as Saudi Arabia led OPEC in maintaining production rather than cede market share to booming U.S. output. The group has become more unified about keeping its daily output target of 30 million barrels because prices are now rising, according to Kuwait’s oil minister. Oil in New York has surged more than 40 percent from its March low amid as U.S. drillers pulled a record number of rigs from fields.

 

“The Saudis must be content that their policy of protecting their market share has worked so well and prices did not stay below $50 for long,” said Christopher Bellew, senior broker at Jefferies International Ltd. in London, who had not seen the report. “They held their nerve and now see a stable market with their share preserved.”

 

...

 

OPEC maintained projections for supply growth from oil producers outside the group in 2015 at 680,000 barrels a day. It also kept its 2015 estimate for demand for the group’s crude at 29.3 million barrels a day. That’s about 1.5 million barrels a day less than the group produced in April.

*  *  *

And so the machines rip crude prices higher... but as is clear, there is plenty going on...

 

As Barclays noted,
there is a huge disconnect between price action in
physical markets where differentials are signalling oversupply and
futures markets where all looks rosy.
Financial drivers
have been key in this commodity rally, with short-covering driving part
of it, but fresh longs being drawn in. Net speculative length in Brent
crude has doubled since the start of the year to its highest level since
data collection began in 2011.

 

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Tue, 05/12/2015 - 11:45 | 6085119 astoriajoe
astoriajoe's picture

I guess silver gets whacked any minute now then?

Tue, 05/12/2015 - 11:49 | 6085136 Looney
Looney's picture

The Saudis are really pissed now. They are in the full tantrum mode. Within just a few years they went from Bush’s dearest friend to Obama’s bitch. ;-)

Looney

Tue, 05/12/2015 - 12:35 | 6085294 ZH Snob
ZH Snob's picture

I'm sure 10,000 princes are crying their eyes out.

Tue, 05/12/2015 - 12:57 | 6085360 MonetaryApostate
MonetaryApostate's picture

Princes don't cry, they rage / quit...  (Just saying)

 

In other news, Yemen is getting roasted by Saudi Generals...

 

Who's going to pay for the war?  Oh that's right, we are...

(We forgot how that works...)

Tue, 05/12/2015 - 11:46 | 6085125 Secret Weapon
Secret Weapon's picture

The Saudis can go fuck themselves in the neck. 9/11 Truth.

Tue, 05/12/2015 - 11:50 | 6085139 samsara
samsara's picture

They were just the drivers in the crime,  the CIA and Mossad via dual citizenship Americans were the brains of the crime....

Tue, 05/12/2015 - 12:23 | 6085249 Agstacker
Agstacker's picture

And Larry Silverstein got the benefits...

Tue, 05/12/2015 - 11:53 | 6085133 samsara
samsara's picture

 

"...Saudi Arabia boosted crude production for a second month to the highest level in at least three decades..."

SA has seen the writing on the wall,  Their tenure is almost up, and anticipate losing control of the infrastructure.

They are pumping out, and Cashing OUT as fast as they can. 

Making as much as they can while they can before they are overthrown and move to a 'Safe Place"  somewhere.

To know what I mean,  look at this story.

 

Iran Responds To US Naval Escalation, Sends Warship Escort For Yemen Aid Vessel

Tue, 05/12/2015 - 11:57 | 6085160 GMadScientist
GMadScientist's picture

"Room erupts in laughter as House Saud attempts to 'whip it out'."

Tue, 05/12/2015 - 12:31 | 6085284 Ban KKiller
Ban KKiller's picture

SA, what a shithole. Unless you are one of the princes. Then you are a douche bag so I don't know...

SA people have no idea what work means. They don't work, their slaves do. See idle middle class bribed with oil money to stay "happy". 

Tue, 05/12/2015 - 12:38 | 6085304 Captchured
Captchured's picture

I see this as a battle between Saudi oil production and US debt production. If the US/Fed Reserve can keep the cost of debt down and keep it available then US oil producers can continue to drill at a loss. That continues to put pressure on Saudi to pump more oil to keep lowering the price in their effort to break the US shale producers. Saudi Arabia has always been the swing producer...the market maker in oil and they can't afford to lose that crown. One of two things seem likely to happen: 1) US shale producers take on more debt than can be supported even at low rates (signs of breakdowns happening now) 2) Saudi Arabia hits their limit in oil production (signs of that happening now). If that really is the war...then I find it fascinating to watch. Whoever blinks first most certainly is the loser. If Saudi backs down then they will have lost their crown as the market maker. If the US backs down then the blood will flow freely from the shale producers.

Tue, 05/12/2015 - 12:38 | 6085306 Intellikon
Intellikon's picture

Called it April 13th ($6/bbl ago)..  More upside in Oil to come

https://twitter.com/Intellikon/status/587742218762526720

 

Tue, 05/12/2015 - 13:03 | 6085417 NoIdea
NoIdea's picture

$100 down to $43 then back up to $60 doesn't seem very "stable" to me

Tue, 05/12/2015 - 13:05 | 6085426 wrs1
wrs1's picture

13,700 bbl/day?  What is this, some kind of joke?  Is Cushing full yet?  When will oil be $20?

Tue, 05/12/2015 - 14:43 | 6085850 farmboy
farmboy's picture

SA just obey to try to drive the price of oil lower as a proxy war for Russia/Iran

Tue, 05/12/2015 - 15:28 | 6086129 chubakka
chubakka's picture

depreciate, fabricate, manipulate......no wait.

https://www.youtube.com/watch?v=VFUEgFdP5zE

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