Saudi Production Cut or Demand Drop?

[William Edwards + 708]

I have a thought question for the readership. Responses are requested.

The headline from CNBC reads "Saudi Arabia cuts oil production in July". Does that mean that the Saudis restrained output to a level less than what was desired by customers, which would support higher prices, or, instead, was the lower output necessary because there were no tankers sent to the loading ports to receive all of the oil that the Saudis were willing to sell, which would push prices down?

Is a lower Saudi production good news for the bulls or good news for the bears?

[Dan Warnick + 6,100]

29 minutes ago, William Edwards said:

I have a thought question for the readership. Responses are requested.

The headline from CNBC reads "Saudi Arabia cuts oil production in July". Does that mean that the Saudis restrained output to a level less than what was desired by customers, which would support higher prices, or, instead, was the lower output necessary because there were no tankers sent to the loading ports to receive all of the oil that the Saudis were willing to sell, which would push prices down?

Is a lower Saudi production good news for the bulls or good news for the bears?

I read that it was/is 150,000 barrels per day or something like that and I thought, so what?  And: why is that news?  Your question makes a lot more sense to me.  Your old favorite: 10 gallons in a 5 gallon bucket (ship)!  A spot of hope for the bulls; confirmation for the bears.

[William Edwards + 708]

1 minute ago, Dan Warnick said:

I read that it was/is 150,000 barrels per day or something like that and I thought, so what?  And: why is that news?  Your question makes a lot more sense to me.  Your old favorite: 10 gallons in a 5 gallon bucket (ship)!  A spot of hope for the bulls; confirmation for the bears.

If what you are saying is "The takeaway is dependent on the preconceived notion", I agree.

[Guillaume Albasini + 851]

 The Houthi attack on two Saudi VLCC  in july had probably some impact on oil shipments. The Saudis decided to temporary halt oil shipments through the Bab el Mandeb strait. But this affected only the last week of july. They could have reduced production to prevent a possible congestion of the port oil storage facilities in case the crisis would deterre tankers to load. But its just an hypothesis.

https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/073118-saudi-vlccs-gather-off-oman-after-bab-el-mandeb-ban

[TomTom + 183]

59 minutes ago, William Edwards said:

I have a thought question for the readership. Responses are requested.

The headline from CNBC reads "Saudi Arabia cuts oil production in July". Does that mean that the Saudis restrained output to a level less than what was desired by customers, which would support higher prices, or, instead, was the lower output necessary because there were no tankers sent to the loading ports to receive all of the oil that the Saudis were willing to sell, which would push prices down?

 Is a lower Saudi production good news for the bulls or good news for the bears?

I think they overestimated demand for their crude in Asia - I always look at export flows before I look to secondary/ OPEC data on production

[William Edwards + 708]

1 hour ago, Guillaume Albasini said:

 The Houthi attack on two Saudi VLCC  in july had probably some impact on oil shipments. The Saudis decided to temporary halt oil shipments through the Bab el Mandeb strait. But this affected only the last week of july. They could have reduced production to prevent a possible congestion of the port oil storage facilities in case the crisis would deterre tankers to load. But its just an hypothesis.

https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/073118-saudi-vlccs-gather-off-oman-after-bab-el-mandeb-ban

Lack of demand or restraint of supply?

[Dan Warnick + 6,100]

1 hour ago, Guillaume Albasini said:

 The Houthi attack on two Saudi VLCC  in july had probably some impact on oil shipments. The Saudis decided to temporary halt oil shipments through the Bab el Mandeb strait. But this affected only the last week of july. They could have reduced production to prevent a possible congestion of the port oil storage facilities in case the crisis would deterre tankers to load. But its just an hypothesis.

https://www.spglobal.com/platts/en/market-insights/latest-news/shipping/073118-saudi-vlccs-gather-off-oman-after-bab-el-mandeb-ban

I'd like to have some live satellite feed of the area.  Oh wait.  The U.S. and its allies DO have live feeds.  Don't you think some forces got shifted to this area and quickly put a stop to the threat?  The KSA spent a lot of money to establish this secondary pipeline via this route and I'm quite sure there were relevant meetings with the military commanders of all area forces about what to do in the event these Houthis acted up.  No proof, just my opinion.

[Guillaume Albasini + 851]

29 minutes ago, Dan Warnick said:

I'd like to have some live satellite feed of the area.  Oh wait.  The U.S. and its allies DO have live feeds.  Don't you think some forces got shifted to this area and quickly put a stop to the threat?  The KSA spent a lot of money to establish this secondary pipeline via this route and I'm quite sure there were relevant meetings with the military commanders of all area forces about what to do in the event these Houthis acted up.  No proof, just my opinion.

The Brits were quick to react sending a special force unit to the area to protect UK ships

https://www.express.co.uk/news/world/996728/Saudi-Arabia-news-iran-houthi-oil-tankers-Saudi

[Rodent + 1,424]

4 hours ago, William Edwards said:

I have a thought question for the readership. Responses are requested.

The headline from CNBC reads "Saudi Arabia cuts oil production in July". Does that mean that the Saudis restrained output to a level less than what was desired by customers, which would support higher prices, or, instead, was the lower output necessary because there were no tankers sent to the loading ports to receive all of the oil that the Saudis were willing to sell, which would push prices down?

Is a lower Saudi production good news for the bulls or good news for the bears?

Saudi self-reported production dipped 200,500 bpd in July from June--if that figure is accurate, that's a big deal. Secondary sources peg it at a 52,800 bpd dip, while exports in July dipped by 100,000 bpd. 

I think its telling that OPEC also adjusted downward its oil demand growth forecast. The production decline (despite its promise to increase production) is clearly an export-driven figure, because domestic oil demand in Saudi Arabia appears to always follow and upward trajectory. Also, July is the hottest month of the year in Saudi Arabia, so I would have expected domestic oil consumption in the Kingdom to actually increase if anything. Saudi Arabia's electricity needs is 70% driven by air conditioning alone. No way their own demand dipped in July. 

Regardless of the whys, I originally expected oil prices will rise given the lowered production, but it would appear that the figures have been interpreted as negative, with people worried that the demand isn't there. 

GO BEARS!