Saudi Arabia has not increased its oil production, despite rising prices. This indicates that Saudi Arabia is already at its limit of production.
Top oil exporter Saudi Arabia is nearing its comfortable operational production limits and may struggle to do much to make up for shortages that arise from new sanctions imposed on Iran by the West, Gulf-based sources said.
The kingdom, now pumping just under record rates of 10 million barrels per day, has poured billions of dollars into its vast oil fields, which on paper should ensure it has the ability to ramp up to 12.5 million bpd.
Long-standing oil policy by Riyadh, the heavyweight in the Organization of the Petroleum Exporting Countries (OPEC), sets aside some 1.5 million bpd as protective spare capacity.
But industry sources said pumping anywhere near the declared production capacity might involve extracting heavy crudes the market might not want. It would also be difficult to sustain higher rates for lengthy periods.
“There is very little unused capacity in the Gulf,” said an oil official in the region. “Saudi Arabia could comfortably manage an extra 500,000 barrels a day or so and, if pushed, could go up to 11 million (barrels a day).”
All talk by Saidi officials that the country will increase production is public relations poppycock. The country cannot do this. Its oil fields are slowly declining. New technologies for extracting more oil have failed to add to production. In short, this is fluff:
“Saudi Arabia can easily make 1 million to 1.5 million (barrels per day) available,” a Saudi source said about output beyond current volumes.
If Iran cuts production in any war, there are no replacement sources.
After spending huge amounts on fortifying their production, the Gulf countries are now reluctant to push output to the very brink and leave them bereft of a supply cushion.
China is looking for additional suppliers. It is dependent on Iranian oil. India and Japan are also desperately shopping. There is no new source. There has not been for 40 years.
If war breaks out in the Persian Gulf — Iranian Gulf is more like it — Iran needs to sink two tankers to send shopping insurance rates through the roof. Shipments will cease. Oil prices will skyrocket.
You had better be in gold.