Saudi Arabian Oil Production and Demand Increase

Saudi policymakers insist the kingdom will maintain its market share and let low prices take care of the surplus by forcing cuts from higher cost producers and stimulating fuel demand.

As demand increases and production decreases, prices will most likely rise.

There are signs that output growth from shale drillers and other producers outside OPEC is starting to slow, but it is not falling yet. The policy they had introduced to maintain their market share in the face of competitors is now under the direction of forces beyond their control. Meanwhile Iran, once OPEC’s No. 2 producer, is set to swell global oil supply further by raising output once sanctions against the country are lifted.

However, he noted, Saudi leaders must be nervous about the precipitous decline in world energy prices.

Crude oil prices surged Thursday amid speculation that Venezuela is growing impatient with OPEC’s policy of keeping markets oversupplied.

Oil producers and investors fear the same stalemate could be playing out again.

Arthur Berman, who is a director of Labyrinth Oil Consulting Services in Texas, agrees that Saudi Arabia is trying to protect its market share.

The damage the Saudi decision has inflicted on Saudi Arabia itself provides reasons for the Saudis to change course. “We will not make the same mistake again”.

Prices of sweet crude fell to their lowest in 6 1/2 years, dropping to around $38 a barrel on some exchanges.

Other Middle East indexes also rebounded.

“OPEC is a farce, there is no real cooperation there, and the latest round of acrimony within OPEC is just more evidence of that”, Brown University Professor Jeff Colgan, author of “Petro-Aggression: When Oil Causes War”, told Sputnik.

With all the factors in the equation in place, crude oil prices close at $38.24 per barrel on August. 2.

In the process, it became clear that not all cartel members were in the same boat. The country had acute economic problems even before the oil price drop. Non-OPEC production barely increased from 1985 to 1992. However, in a system where the state redistributes income, often in the form of wages, subsidies and social “handouts” to its citizens, it is far harder to take something away than it is to give it, and doing so risks political upheaval at a time of great regional uncertainty.

A federal indictment charges Jason Halek, of Southlake, Texas, with conspiring with others in a number of illegal acts including injecting saltwater – an unwanted byproduct of oil production – into a disposal well near Dickinson without first having North Dakota inspectors witness a test of the well’s integrity and continuing to inject the fluid after a failed pressure test. Halek entered not guilty pleas to all charges including violating the Safe Drinking Water Act, making false statements and obstructing grand jury proceedings.

Meanwhile OPEC struggled to restrict its own supply. So why didn’t we run out of oil and why is the price of the commodity now at multi-year lows?

But it never happened. While slipping prices have curbed some new exploration for wells, it has not changed the fact that record U.S. oil extraction has slashed dependency on imports. In the second quarter, 96 million barrels a day were being produced and 93 million barrels consumed.

Other OPEC members, such as Venezuela, Libya, Algeria, Nigeria, Iran, and even Ecuador (the smallest producer and exporter in the group), require triple-digit crude prices to have any hope of balancing already suspect budgetary outlooks.