Saudi Arabian Drilling Rig Count Rises

Saudi Arabia had 49 drilling rigs in place during the month of January according to a report at Bloomberg News. That compares to just 23 rigs in January of 2011. The increased rig count is due to an effort on the part of the Saudis to reduce volatility in the price of oil as sanctions against the government of Iran are put into place.

The Saudis claim spare production capacity of 2.5 million barrels/day, an amount equal to the current level of Iranian exports. By boosting their production capability, the Kingdom will retain its spare capacity and add additional capacity to help guarantee supplies if Iranian supply is disrupted.

At best, though, the Saudi’s drilling increase represents a medium- to long-term solution to crude supplies, and is likely to have no impact on current pricing. There have been calls on President Obama to release more crude from the US Strategic Petroleum Reserve to provide immediate relief from current crude oil price increases. There’s no indication that the President will do that, but often the threat of such a release is just as effective as an actual release itself in slowing crude price increases.