Saudi Arabia cuts investment to oil sector
Baku, November 25 (AZERTAC). Saudi Arabia claimed last weekend that the global crude oil markets were oversupplied even with Libyan production essentially shut down - an incredible claim. The Saudi`s said they were cutting back on production - even in the face of high and sharply rising oil prices! Estimates by both OPEC and the IEA are for crude oil demand to increase by 1.4 million barrels per day in 2011.
And last week China announced oil consumption hit a monthly record in March with demand increasing 11 percent from year earlier levels to 9.16 million barrels per day. Inventory levels were essentially flat from year earlier levels. In the first quarter of this year oil consumption in China rose 10.2 percent with gasoline consumption increasing 5.6 percent and diesel ring 10.6 percent. More oil was used for industrial production, infrastructure construction, and in the agriculture sector. This was the sixth consecutive month oil demand in China grew by double digits.
Growth in global oil demand in 2011 will be above average according to IEA estimates and follows one of the highest rates of demand growth in decades in 2010. With the natural depletion of major existing fields, the slowdown of capital expenditures in the sector due to the financial crisis, the temporary drilling ban in the Gulf of Mexico after the BP disaster, and continuing unrest in a number of Middle East and African oil producing countries it is highly unlikely that productive capacity will rise as much as demand any time soon. Violence was reported in the press last weekend in Libya with continued fighting, with violent protests in Syria, Yemen, and Bahrain - and ongoing governance issues reported in Iraq with recent bombings. And Nigeria, another exporter of ‘light sweet’ crude is experiencing violent protests after this weekend`s elections.
The global excess productive capacity available to increase oil production (and exports) in our opinion will fall in 2011. While exact capacity data is unknown in many areas due to confidentiality laws, we think excess capacity will soon fall to levels that have precipitated price spikes in the past, provided demand is not restrained by a global economic recession.
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