This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Saudi Oil Moves: A Drop in the Bucket?

NEW YORK ( TheStreet) -- Saudi Arabia is doing everything it can to cool an overheated crude oil market. But the verdict has yet to come in on whether the Saudis will be able single-handedly to drop energy and gas prices for everyone.

In response to increasing geopolitical risks from Iran and in other oil-producing regions in the Middle East, the Saudis have made some stunning moves to try to lower oil prices on the global marketplace.

First, they have ramped up their own production to an eye-opening 10 million barrels a day, more than they have pumped in more than 30 years.

They have been storing excess capacity in Rotterdam and elsewhere in Europe to make it quickly accessible to the most sensitive markets.

They have contracted a new fleet of supertankers to fill and transport more than 20 million barrels of oil to the Gulf Coast of the United States. Eleven VFCCs (very large crude carriers) were contracted in the last week by the Saudis, in comparison to 2011 when the Saudis contracted only six for the year.

The Saudis have also begun to reopen oil production areas that haven't been tapped since 1980. This return to older oil fields won't have an immediate production effect, but it underscores the desire of the Saudis to develop even more spare capacity than they already have.

This deluge of oil that's about to hit the global market is designed to have one effect: to lower crude oil prices. But it is still not clear whether it will accomplish that long-term goal.

After all the Saudis have tried this before, in 2006, but the markets were only temporarily impressed by the increased production before they resumed their march to an ultimate high price of $147 a barrel in July of 2008.

Indeed, it's tough for me to see what these 11 supertankers will do once they reach the Gulf Coast here in the U.S., because there is already a steady supply of crude to the refineries there, and we have been a net exporter of gasoline for the last several months and for the first time in our history.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%
TSLA $222.56 -4.20%
YHOO $36.00 -0.03%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs