Saudi Arabian Oil Rig Count

The other day, I wrote, concerning the failure of Saudi Arabia to increase oil production in March,

The burning question is: why? Back in 2006, when their production started to gradually decline from 9.5mbd even as global oil prices were in the worst spike since the 1970s, I was an advocate of the view that the decline was largely involuntary: they’d never produced more than 9.5mbd, they’d underinvested for decades, and some of their big fields were getting very tired (particular northern Ghawar and Abqaiq) and they were starting a big rash of new projects and ramping up their rig counts at the same time.

I see current events differently. The reduction in late 2008 was clearly voluntary to support prices in the face of the great recession. There’s no new projects announced, and the rig count hasn’t taken off. So my take is that the failure to increase production to compensate for Libya is deliberate.

(Emphasis added now).  I must confess that when I wrote this, I had not actually examined the last two months of rig count data – I last checked in January, when it appeared that the rig count was falling lower and lower. That proved to be an important mistake.  If you look at the graph above, you can see that February and March show a sudden sharp increase that is even more pronounced than what happened in 2005.

We’ll have to see what happens in current months, but this does give a little evidence to the “can’t” side of the debate, versus “won’t”, when it comes to the Saudis not raising production.

Early Warning