Saudi Arabia continues to pump crude at record pace, once again topping Russia in oil output.
|Oil production (thousand barrels per day; source: Joint Organization Data Initiative)|
Supplanting production shortfall resulting from the Iran sanctions is certainly one of the goals. But Saudi Arabia's economy is growing rapidly and a great deal of the increases in production is driven by domestic demand. Saudi Arabia is part of the BICS group of nations (not BRIC) that now drive global economic growth.
|Saudi Arabia GDP growth |
(2012 GDP is a forecast by Jadwa Investments)
Given Saudi strong domestic demand, oil may be quite vulnerable to supply shocks in spite of Saudi record production levels. This is particularly significant given a sharp and somewhat unexpected decline in US oil stocks.
With Brent crude already at $115/barrel (up 28% from June lows), the next shock to global economy could come from a potential (real or perceived) supply disruption - and Saudi Arabia may be unable to come to the rescue due to its domestic demand. That is one of the reasons the Israel-Iran "standoff" is so dangerous at this juncture.