Saudi Arabia continues to pump crude at record pace, once again topping Russia in oil output.
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| 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.
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| 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.
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| Source: EIA |
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.
SoberLook.com