Saudi Oil Production May Hit Record Level

Gasoline production increased for the week, averaging 10.3 million barrels per day.

“With oil prices remaining low for the foreseeable future and Iran possibly having a harder time getting to its production targets, in the long run the calculus about a freeze may begin to shift”.

US crude inventories fell 2.5 million barrels last week, the Energy Information Administration (EIA) announced, surprising analysts who had expected a build of 522,000 barrels.

“Oil is now close to an equilibrium price, and unless we get further developments, I would expect to see it trading around the United States dollars 44 to USD 45 level for the balance of the week”, Michael McCarthy, a chief market strategist in Sydney at CMC Markets, told Bloomberg News.

“The market share that Iran used to have globally, and the market share that Iran had within OPEC as a whole, fell dramatically between 2011 and 2013, and Saudi Arabia took much of that share”, said Michael Cohen, an analyst at Barclays in NY. A spokeswoman for the nation’s oil ministry said that no decision has been made about attending the meeting, and that the country has not made a decision on joining an output cap.

This daily breakout, has signaled a resumption of bullish momentum after Crude Oil put in a new monthly low at $39.17. Iran’s oil officials said that, before considering cooperation, their production had to rise to between four million and 4.2 million barrels a day. If we can break down below the $48 level, the market should then reach down to the $46 level after that. Iran had said that it planned to increase production by 500,000 barrels per day in short-term production, with a goal of reaching 1 million barrels per day by the end of the year. “Iran is a risky climate for investment; second, foreign investment in Iranian oil has been a subject of intense political controversy there for more than sixty years”. Iranian output in June climbed to 3.63 million b/d, its highest since June 2011, and very close to pre-sanctions levels.

“An agreement is still improbable”, research house Capital Economics said in a market commentary. With OPEC now producing at even higher levels, Jamie Webster, an energy analyst with Columbia University, told the Financial Times that “I don’t see anything to make me think outcome is going to be different this time”. There has been quite a bit of a concern when it comes to the demand situation, and of course the supply situation as we now believe that the supply will drop next year as drilling continues to be less and less profitable with low oil pricing. Cohen said some producers are perhaps holding production levels at record levels in order to give them more space should the cartel eventually agree to a production freeze.