Indiana Jones, Beyoncé, And Saudi Oil Production
Thirty-four years ago today, Indiana Jones was the number one movie at the box office with ‘Raiders of The Lost Ark.’ 1981 was also the year in which Beyoncé was born. These two reference points are just to highlight how long ago 1981 was (even if a swashbuckling Harrison Ford doesn’t seem that distant a memory). But while the world was a very different place back in 1981, one thing is the same now as it was then: the level of Saudi Arabian oil production.
According to OPEC data, Saudi oil production reached 10.3 million barrels per day in May, a level not seen since 1981. This data point is not all that surprising, given recent rumors and murmurs of a ‘price war‘ and the ‘targeting of market share‘ by OPEC’s leading producer. To put this May production number in context, it is some 435,000 bpd higher than the prior year; in March alone, Saudi increased production by 658,000 kbpd on the prior month, or ‘half a Bakken ‘as one article designated it. But it hasn’t just been Saudi who has ramped up production over the last year; this has been a theme across various members of OPEC. The cartel pegged production at 30.98mn bpd in May, while initial estimates for June pin this number at well over 31mn bpd, a three-year high.
Saudi’s export volumes are curious, however, in that they do not exude an obvious trait of stealing market share. In fact, they don’t even appear to be improving. Although Saudi has 12,000 miles of domestic pipelines, it does not operate any major functioning international pipelines. In other words, waterborne is the only way out for crude exports:
Domestic demand explains some of the anomaly away. Saudi Arabia is one of a handful of countries that directly burns crude oil for power generation, and estimates suggest it could increase production to as high as 11mn bpd this summer to meet domestic needs. Saudi could burn ~900,000 barrels of oil per day used this month to meet an increasing demand for air conditioning, just as it did in July of last year:
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