EC The Kingdom Offers Less Oil

While the media remains fixed on supply, the rest of the financial complex is prepared elsewhere. On Monday, Saudi Arabia announced what the mainstream has been waiting for (and often blatantly demanding) since the summer “rebound” faded into August liquidations. Given the mythical status of Saudi supply, this was the one country thought to be the only possible savior.

Crude prices slumped, rebounded sharply and then lost their gains all in the space of a couple of hours Monday after Saudi Arabia — the world’s largest export of petroleum — said it would cooperate with all oil producing countries to help stabilize the oil market…

Crude prices staged a sharp turnaround on Monday’s reports, with Brent trading at around $45 afterwards and light crude at just under $42. The commodities have since pared some of those gains: down 20 and 60 cents respectively. Prices had previously been down on the day and, last week, WTI crude fell below the psychologically important $40 mark for the first time since August.

Yet, now a few days later, oil is practically unchanged despite the possible alteration in oil supply. Domestic or global, the word “glut” is most often used to describe the commodity situation as if it were exhaustive when there isn’t any evidence it even applies here or elsewhere. The Saudi announcement is simply the latest stinging effect that demands proper appreciation of the real imbalance.

US fundamentals continue that demonstration, as oil production endures under reduction after peaking earlier this year. Despite that reversion in supply, oil stocks (inventories) have once more surged back to 80-year highs and leaving little doubt as to the cause of all the world’s oil problems (only where orthodox economics has so fully supplanted common sense are low oil prices to be so unwelcome). This week’s US EIA update showed yet another increase in inventory, albeit small, making it nine consecutive weekly builds and eleven of the past thirteen – dating back to the week of August 21.