With political turmoil spreading across North Africa and the Middle East and oil and gasoline prices rising, all eyes in the energy world are on Saudi Arabia. So when the Saudis announced last weekend that they had cut oil production by 800,000 barrels a day only weeks after they said they would meet any supply gap left by the civil war in Libya, oil analysts offered an array of interpretations.
Some agreed with the Saudis’ publicly expressed view that the world was actually amply supplied with oil and that speculators and traders were to blame for the rising prices. President Obama even weighed in and endorsed that view.
But others wondered whether the Saudis were able to increase their production at all. Still others suggested that the Saudis were beginning to side with more hawkish members of OPEC, including Iran, who want to curtail production to bolster prices.
The reason for the change, some say, is that the Saudis now need more oil revenue to pay for newly promised social programs aimed at forestalling the kind of political upheaval gripping many of its neighbors.
In all probability, it will take several months before we know who is right.
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