When it comes to energy, and specifically crude oil trading, few names are as respected, if controversial, as former Citi star trader, Andrew Hall, whose $100 million pay package in 2008 forced Citi to sell energy unit Phibro [11]to Occidental. He currently is primarily focused on his own fund Astenbeck, where he trades what he has always traded - commodities, and primarily oil. As such, his view on the oil market is far more credible than that of the EIA, or any conflicted Saudi Interests. So what does he have to say about the biggest wildcard currently in the energy market, namely whether or not Saudi Arabia, can push its production from its recent record high of just under 10,000 tb/d to the 12,500 tb/d that would be needed to replace all lost Iranian output (a question we asked rhetorically two weeks ago [12]). The answer? Don't make him laugh.
Here is where Saudi oil production has been, and where Saudi promises it can take it.
[13]
From the recent Astenbeck investor letter:
Contrary to what various pundits and politicians assert in the media, OPEC is not sitting on 2+ million bpd spare capacity. The news last month that Saudi Arabia was planning to demothball the Dammam oil field after 30 years because of "tight market conditions" has a whiff of desperation. The plan will reportedly add all of 100 kbpd of heavy crude to Saudi Arabia's capacity.
In other words, forget Saudi Arabia pumping more. The only hope should there be escalation in Iran will be how much oil is extracted from the SPR. And as everyone knows, the only one who benefits from that particular idiocy would be China.