How much oil can the Saudis pump? In the world of oil, there is no bigger question. On Saturday, The New York Times' Jad Mouawad reported that Saudi Arabia "is planning to increase its output next month by about a half-million barrels a day," bringing the country's total production up to about 10 million barrels a day.
As ace oil price watcher James Hamilton, an economist at U.C. San Diego, noted, the news makes for a "a potentially huge story." Saudi Arabia has claimed for years, in the face of much doubt from peak oil theorists, that it has new capacity coming online that will enable it to keep pumping as it pleases -- even as the kingdom has simultaneously rebuffed President Bush's plea to raise production. Hamilton surmises that one reason for the Saudi change of heart is the clear proof that sustained high oil prices are now taking a real chunk out of demand, and threatening to derail the entire global economy. "If the Saudis do produce 10 million barrels a day next month," wrote Hamilton, "I would expect it to have a significant impact on near-term oil prices.
But how near-term is near-term? On Monday morning, the Financial Times reported that energy traders were skeptical of the Times' scoop. According to the FT, the market consensus is that Saudi Arabia will only boost production to 9.7 million barrels a day (although even that total would rank as the highest production since 1981).
And in New York, the price of West Texas Intermediate oil futures once again broke a new record, reaching $139.89 a barrel before falling off slightly. Talk is cheap, the traders seem to be saying -- let's see the oil.