Saudi Arabia Has Yet To Fully Supplant Libyan Shortages


Libyan production halts have caused for greater need for other producers to ramp up production, but so far, Saudi spare capacity has not been tapped into to the extent previously thought by analysts.

According to David Blair in the Financial Times:

“Saudi Arabia, which controls about three-quarters of Opec’s spare capacity, raised its output in the first quarter of 2011, producing an average of 310,000 b/d more than during the final quarter of 2010.

But Saudi production remained flat in February and March, averaging 8.9m b/d in both months.”

However, other factors are at play. For one, Saudi Arabia was unable to produce exactly the same light blend as Libyan crude, although it tried.  And the earthquake/tsunami that struck Japan has reduced demand there, according to the article.

Meanwhile, as we wrote yesterday, Saudi Arabia has plenty of spare capacity on its hands. Whether or not it will ramp up production in April remains to be seen, however, we suggested in a previous analysis that Saudi Arabia would be able to increase production if the factors were right:

“If all stays the same, and it never does, Saudis new blends and greater production in the coming months should cover for Libyan shortfalls and increased demands to fuel the global economic recovery, assuming the situation in Libya remains unresolved.”