Saudi Oil Supplies Ensured For Now, Market Eyes Planned Demonstrations
Saudi Arabian oil supplies are seen being ensured for now, however the markets fear a possible domino effect from the region’s unrest ahead of the planned March 11 ‘day of anger’ protests in that country.
That said, currently only a total halt to Libyan exports and the destabilization of another oil producing country, such as Algeria, would create a deficit in oil demand said Steffen Hertog, a professor of Middle Eastern Studies at the London School of Economics, while the price of a barrel of oil hovers around the USD 115 mark.
“Saudi Arabia has already increased daily production by about 700,000 bpd and it could increase by as much as two or three million barrels” said Hertog.
The revolts that have overthrown Tunisia and Egypt, and that are now unsettling Mu’ammar al-Qadhafi, are fueling constant price hikes.
The latest estimates from last night by the International Energy Agency (IEA) said that the fighting in Libya has forced a reduction of production from 1.5 million bpd to some 850,000 bpd. The market’s nervous reaction is based more because of the specter of a domino effect that might also include Algeria and perhaps even Saudi Arabia.
In that vein, last week, Saudi Arabian King Abdullah increased public sector salaries and promised 110 billion Riyal, or about USD 30 billion in new social sector investments, suggesting that the government may not be feeling so secure.
“In Riyadh,” says Hertog “they have not forgotten the United States’ ‘abandonment of Hosni Mubarak, an ally until such time as the street allowed it, then becoming an enemy of the people and of freedom”.
More than American support, Saudi rulers are hoping to take advantage of the opposition’s organizational difficulties.
“There is malcontent over corruption and lack of jobs bu there is also want of a revolutionary agenda and there is no network of dissent that could be compared to the Egyptian or Tunisian ones”.