Saudi Arabia announced today that it will increase production for a third-straight month in an effort to curb record oil prices. The kingdom plans to raise its production by 200,000 barrels to 9.7 million barrels next month. While this can't be taken as bad news, it seems that there are already a lot of skeptics as to whether this will actually cause crude oil prices to move lower. John Hall, of John Hall associates believes that in order for the increase to make oil prices move lower at all it would have to be at least 500,000 barrels a month.
Many, including myself, believe that this is nothing more than a public relations move on the Saudis part. They want to be seen as doing everything they can to drive the price of oil lower. In reality, the Saudis themselves know very well that this small increase will do virtually nothing in the whole scheme of things. The longer term problems will remain, and those who continue to think that supply is meeting demand are simply kidding themselves. The Saudis want to attribute the crude oil gains to pure speculation in the oil market because then they won't be pressured as strongly to increase production drastically.
The oil producers throughout the world have been slow to react to calls for increased supply because of the jump in demand for crude oil. In reality, why would someone like the Saudis want the price of oil to go down? They are certainly sitting pretty as prices climb to never before seen levels. They will continue to make things look as if they are concerned about rising prices to try to keep those in the west as calm as possible, but you should understand that they are hardly doing their best to help the situation.
The small boost to the oil supplies in the month of July is nice, but where is the longer term solution? If the Saudis and the other major oil producing countries in the world have their way, the current path we are on might as well be the long-term solution. This much is clear, someone must step up and make the oil producers understand how dire the situation is, or else nothing substantive will happen.
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