Is Saudi Telling Fairy Tales About Oil? No Production "Surge" Detectable

[hatrack]

"The most recent announcement from Saudi Arabia's oil minister says its production is set to rise, but many in the industry feel the thoughts from Ali al-Naimi are based more on political fiction than energy reality. Al-Naimi painted a relaxed and generally benign picture of the state of the world's oil supplies. His first claim was that "the fear premium, the fear from tension, fear from scarcity, fear from lack of spare capacity, all of this fear has put $10-$15 on the price of oil".

But the minister's explanations do not appear to stand up to scrutiny. Actual physical disruptions to supply, especially bombs next to Iraqi pipelines, do little to inflate prices day-to-day. On 18 October, oil reached a new record high of $55 a barrel. Since then there have been at least thirty armed attacks on both Iraq's oil pipelines and an increasing number against well heads.

"Tension" too appears a minimal concern to the market. Since 18 October there have also been planned and executed strikes in Nigeria and Norway. Shell has delayed its annual general meeting from February 2005 to June 2005 on account of a possible reserve calculation discrepancy. Yukos, the Russian oil giant, is in turmoil following a low-priced sell off order from the government of Vladimir Putin. Meanwhile major producers Venezuela and Iran have actually suggested output cuts. Yet, since 18 October the price of oil has not risen, but fallen by 11%.

EDIT

Firstly he announced that Saudi Arabia currently can produce 11 million barrels per day (bpd). This is news to the market. The International Energy Agency (IEA), in its November report, puts sustainable Saudi production at 9.5 million bpd. Currently Riyadh is producing 9.6 million bpd to satisfy the increase in demand and the IEA notes that it may be able to "surge" produce another 1 million bpd for a few days in case of some kind of short term catastrophe. But currently Saudi can realistically produce 9.5 million bpd. Or can it? "All these numbers are hard to square," says energy banker and Saudi expert Matthew Simmons of Simmons & Co, Houston. "Even the verification of reported current production leaves a question or two. "The data produced by the IEA on crude imports to their member countries by country of origin show no sign of any surge production ... imported into the IEA countries over last three years other than the 2nd quarter of 2003. "Saudi Aramco's annual report of 2002 reported crude production of just under 7 million bpd. If the output is up 2.6 million bpd, it is hard to see none showing up in the IEA member countries."

EDIT

http://english.aljazeera.net/NR/exeres/0234CBB3-169D-42DF-8B33-6BEFF80FA478.htm

[phantom power]

1. sometimes, it's good to be in touch with your fear.

[cliss]

2. Yes, the drug pusher from afar

does not want to frighten his junkies. Oh, maybe every once in a while....

I agree that 11 million bbl/day is delusional. Even 9.5 is overreaching. The problem with Saudi oil is that it is not "inventoried" like an auto parts store is. They don't divulge the rest of the world how much oil they have. Oil analysts can only guess, because the Saudi's aren't telling. Or if they are, they could be exaggerating. Methinks their supply is dwindling. And they have less than they claim.

I don't claim to know, I just read different web sites.

A very good web site with good up-to-date information about Peak Oil is http://www.fromthewilderness.com.