The latest International Energy Agency (IEA) monthly oil market report showed that Saudi Arabia increased its June crude oil production but a supply gap for Q3 still remained.
This was the first IEA report since the Paris based organisation took the dramatic decision to release strategic stockpiles which has seen the IEA provide an extra 2mn bpd on to the market every day since June 23 for a 30 day period.
The IEA said it "took a resolutely positive view" of its action so far, which it said had narrowed the price gap between high-quality, easy-to-refine oil and heavier, more sulphurous grades.
The report also signaled a continued supply gap of around one million bpd between the amount of oil the OPEC is pumping and the demand for its crude. The report said that the total OPEC output of 30mn bpd still remained “well short” of the anticipated “call” on the cartel’s crude of 31.3mn bpd in the Q3 2011.
The report also estimated that Saudi output increased to 9.7mn bpd in June, the highest level since February 2006. “Saudi direct crude burn has continued to rise steadily and is on track to reach a new historical record in 2011, potentially capping future Saudi crude exports, despite rising production,” the report stated.
The report highlighted that Saudi Arabia had domestic reasons for its unilateral decision to pump more oil last month. Many of the extra barrels will have been supplied to its own refineries, where throughput is believed to have risen by 250,000 bpd to 1.71mn bpd, largely because of the return to full service of the Rabigh facility after routine maintenance.
The Kingdom needed more oil for “power generation and water desalination plants during the peak summer season.” About half of the extra output, 350,000 bpd, is believed to have entered the international market.
IEA report stated: “This new pattern of direct crude burning has implications for global demand seasonality.” The difference between peak and trough Saudi direct crude demand increased from about 180,000 bpd in 2002-2008 to about 660,000 bpd in the years since 2009, the report said.
