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A massive drop in KSA US oil exports
Saudi Arabia has been a long time number one supplier of crude oil to the US. But as recent data shows the historical trend hit a reversal and not only have the KSA oil exports to the US fallen, they have fallen so much that the present number represents less than half of the KSA exported US oil from its peak in 2008. They hit a 22-year low. These are some of the more interesting data points. The total export number in August of 2009 is down by 51.4% or 788 000 b/d from a year earlier. The August number represents a 22-year low for KSA USA oil exports. Even though the global prices are on the rise, which can be prescribed to the inflationary environment and subsequent assets bubble, the steady supply of oil is at its low.
Some try to explain the current paradoxical situation by offering a line of reasoning which draws the parallel between increased Chinese demand, which was spurred by domestic credit expansion and increased domestic demand, and the aforementioned asset bubble caused by FEDs monetary policy. Even if we take that line of reasoning, one has to asks; is the increase in Chinese oil demand so huge that it has successfully neutralized the massive drop in the KSA US exports. One would think that with a 10%+ growth rate China can successfully absorb the decline which we are witnessing is happening in the USA. That sounds like a plausible explanation. But on the other hand, when one analyses the level of the economic development in China and the USA, the reasoning simply becomes ridiculous and is to be dismayed. The recent data shows that, although China is growing faster than the US, the consumer habits of China's citizens pale in comparison with the consumer habits of the USA citizen. Even if we use a population multiplier of 3x, still it takes 3 Chinese citizens to consume the same amount of goods as one US citizen.
Although the recent GDP data suggest that the US economy is on the path of the recovery, one only has to observe the data more rigorously to conclude that almost the entire growth in the GDP was due to the measures taken by the Obama administration. Also, if we take into consideration the relative success of Cash-4-Clunkers program the data becomes even more paradoxical. Given that the program actually increased the number of vehicles on US roads.
Also the recent report from the non-OPEC oil production countries further mystifies the drop in the KSA exports to the USA. 40% of the global oil is provided by OPEC, and 60% of global oil is provided by non-OPEC oil producers. Russia is a non-OPEC oil producer, but even if we take Russia out of the picture, we are still left with a 44% share in the global oil production by non-OPEC producers. Also in the non-OPEC segment of oil production the dominant players are big oil companies such as BP, ExxonMobile, Shell, Suncor and countries like Brazil, Norway, the UK, The USA, Australia. Below is a graph which demonstrates the production trend of non-OPEC producers.
On an annual basis the US imports of KSA oil peaked in 2003 when they stood at 1.726 million b/d, but stayed at levels of 1.4 million-1.5 million b/d over the next few years, averaging 1.5 million b/d in 2008. On a monthly basis KSA exports were not below 1 million b/d since the late 1980s, except in March when the reported number was 944 000 b/d. With the recovery in equities, and generally more optimistic future economic picture, the exports increased to 1.021 million in April, just to fall again in May at the level of 996 000 b/d, with further decrease to 902 000 b/d in June just before they recovered to the level of 1.137 million b/d in July.
Then came a strong, and unexpected decline in August when the reported number was just 745 000 b/d, a number not seen since December of 1987. So far this year, the EIA shows, the number averaged just 1.022 million b/d well below the average number of 1-537 million b/d in the first eight months of 2008. This number puts KSA in the third place on the list of biggest US importers, with Mexico on second and Canada at first.
While volume might pick up by the end of the year, a recent breaking of the contract to price its oil on WTI, shows that something is afoot in KSA, and that the recent multi-decade low may not be the lowest number which will denominate the quantity of the oil which KSA exports to the US.
This development is still a mystery, but we hope we will see some data in the near future which would explain the sudden massive drop in a decade long stable supply.
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CB, FYI
http://www.321energy.com/editorials/george1/george110509.html
Nice article. I started to read "The Prize" on the subway but it's 928 pages are rather unwieldy while standing. Note to self, finish reading "The Prize". We can only hope when the non-Saudi oil runs out alternative energy sources will be in place. I agree that Mexico is in trouble once their production drops off.
I have read the Prize, it's worth it.
On Mexico: watch the US border fences double in height as Mexico's oil exports are halved.
The only viable alternative to oil is demand destruction. Ditch your car and grow your own veggies. (unless you have a spare Mr Fusion lying around). After 150 years, cheap oil --the motor of economic growth-- is gone, and we have to say goodbye to our current lifestyle.
All other alternatives take too long to replace oil completely (solar/wind), impact the quality of life, both human and other, in environmentally stressed areas (cutting rain forest for palm oil plantations), cannot replace oil (nuclear fission), face public resistance (nuclear fission), take a lot of energy input (biofuels), involve the use of expensive and hard-to-come-by materials (gallium, indium, neodymium) or are still in the fiction stage of science fiction (I know a couple good fusion reactor designs though)
herne, if you're interested in exploring possibilities in the realm of the esoteric sciences, check these out:
http://www.hbci.com/~wenonah/new/milewski.htm
http://rodin.freelancepartnership.com/content/view/13/31/
fascinating stuff to say the least...enjoy
Sorry for being blunt, but --at a glance-- these devices seem more like scams than real science.
Some real cool fusion designs:
http://www.emc2fusion.org/
(These guys are being funded by the US Navy, after all they are actively searching for hydrocarbon alternatives to fuel their ships)
http://www.generalfusion.com/t5_general_fusion.php
(A "steampunk" fusion reactor, using acoustic waves through a spinning vortex of molten lead to collapse a plasma)
Can't say that I agree with the positions of either of those sites, but I only gave them the once over.
CB - Something that is currently in production in europe is the perendev generator. It doesn't require any fuel, running instead on rare earth magnets. Here is the website:
http://www.perendev-power.com/emm%20300kw.htm
and here is a youtube video of one of their ealy designs for the motor:
http://www.youtube.com/results?search_query=perendev&search_type=&aq=f
double post deleted
This article from the oildrum shows the Saudi production capacity. They are past peak.
http://www.theoildrum.com/node/5154
Gunther, if that is true, then i think this http://en.wikipedia.org/wiki/Export_Land_Model is the reason for the numbers i have listed in the article.
Thanks CB (get well soon).
Putting on my peak oil hat: KSA crude reserves are -as far as I know- pretty much depleting, in my eyes the reason why they pushed through OPEC quota cuts last year and why they have been taken over by Russia as the #1 producer and exporter.
</PO hat>
Anyway: via The Oil Drum:
http://www.reuters.com/article/rbssEnergyNews/idUSPEK16377420091103?rpc=...
thank you man for the good wishes. yeah, i was just reading that. but check this out
http://en.wikipedia.org/wiki/Export_Land_Model
it fits perfectly with this KSA situation, and when you consider that they have probably overestimated (lied) their true oil holdings the situation really becomes weird.
I better put my tin/peak/(f)oil cap on and proceed with caution :D ....
I think the reserves overestimation is somewhat an analogy for the current debt crisis.
OPEC overestimated their holdings in the 80s so they could increase their quotas and produce more. Now "reserve destruction" comes into view.
About ELM, I have been fortunate to pick up on that one since I started becoming an avid TheOilDrum reader two years ago. I think ELM is the reason for $80 a barrel -- EVEN in this period of crisis -- which makes this recession/depression WORSE than the Great Depression. Back then, liquid carbohydrates were still cheap, abundant and easy to come by; not so anymore.
For a great ELM example, watch Mexico: these guys have been depleting their biggest reserve (Cantarell oil field) like there was no tomorrow. And now, suddenly, there IS no tomorrow, looking at their depletion rates. Soon they will seize to be a net oil exporter. Wonder what product they will export to support a steady input of crude :)
You mean hydrocarbons right?
My mistake, yes, hydrocarbons.
Cheeky, There is a lot of oil sitting in oil tankers offshore throughout the world. That may explain the drop in production/sales.
I won't be wronged, I won't be insulted, and I won't be laid a hand on. I don't do these things to other people, and I require the same from them.
Books
yeah, i know ... i think the amount of oil which is parked in tankers and on shore storages i something in the region of 300 million barrels. I will need to check that piece of data later. Thanks for the reminder. But i dont think that this has anything to do with a 51% drop y-o-y ..... Its just too big that the only cause of it is the amount of oil which is sitting around. Also, the recent pullback from WTI contracts is painting a broader picture of the whole situation.
Hi Cheeky, I found this at: http://online.wsj.com/article/BT-CO-20091030-712985.html
The important part,
U.S. demand is still weak - despite the third-quarter GDP growth - and consumption hasn't picked up enough in fast-expanding economies like China to put much of a dent in the global surplus of oil and fuel.
Using the amount of oil held offshore on tankers as a measure, the glut is still growing, according to JBC Energy, a Vienna-based consultancy. Oil held in floating storage was unchanged in October at between 40 million and 45 million barrels, while offshore stocks of distillate, such as diesel, rose by at least 20 million barrels, to between 85 million and 95 million barrels.
We would need to know what Saudi Arabia's overall production is and then we'd have guess as to where they are selling that oil.
Are you implying that Saudi Arabia is looking for a new benefactor/protector based on the decline in oil sales to the U.S.?
I won't be wronged, I won't be insulted, and I won't be laid a hand on. I don't do these things to other people, and I require the same from them.
Books
No, of course i am not. That said,i am more interested in their overall oil reserves than in their annual production. Scroll down the comments and click on the wiki link i posted and you will see that something weird is happening to them. Also, the demand did fall by that much and could have in no possible way account for all of the decrease in KSA US exports. Simply impossible. Also, click on the Reuters link and read about the recent Sinopec agreement with KSA. Interesting stuff. I think that MAYBE there is a gravitational shift occurring in KSA, meaning that they are becoming more China dependent in the future. But as long as the US is the worlds largest economy i am sure the Saudis will remain to supply it with oil. How big with that supply be i don't know. But if the real reason behind this recent drop is what i suspect it might be, then SWHTF really soon, as in 5 yrs. Thanks for the inputs, its always nice when someone supplements the original article with valuable data.
The "Gravitational Shift" would be West to East. Which for me implies nothing to do with oil, back rather security. China does have a backdoor into Iran, which if we are to believe the MSM, is one of SA major concerns. But, on the other hand, China has a shitload of dollars and oil is "still" priced in greenbucks.
I wouldn't put it past SA to play both sides to try and solve their security problems.
As to reserves, I agree, but the US still has the best "wildcatters" so maybe they still needs us, just a little (and a couple of our Carrier battle groups)
I won't be wronged, I won't be insulted, and I won't be laid a hand on. I don't do these things to other people, and I require the same from them.
Books
Cheeky...thank you very much. Enlightening indeed.
Cheeky, the graph you posted comes from the blog site http://gregor.us. If you're using other people's data and graphs, please site the source. Greg didn't mention where he got the graph. I assume that he created it because he has created similar graphs in the past.
Did you grab that graph from gregor.us? If not, from where? Site the source please.
George Orwell
source of the graph: google.com/image-search and i have never heard of that man or this website .....
EDIT: sorry .... do you want me to send some money Greg's way for unintentionally using his graph which i found on Google. If yes, please provide me with the domain to which i can send the money to. Thank you.
Google image search shows the source of the graphic. You can easily cite which web site google grabbed it from.
I'm not affiliated with http://gregor.us in any way BTW. I'm just pointing this out.
George Orwell
well sorry, i just clicked on the image and dl it .... i don't pay attention to sources ... but, yes it would be fair of me to do so in the future ..... i hope i didn't cost the man any money .... too bad i can not edit the article anymore ...
mexico output declining steadily. they won't be #2 in a few years
There #2 in oil production? Last time I checked, Mexico was #6. ???
how does c4c put more cars on the road, for every one sold one was taken out?
well picture it .... you drive one of your old shabby shitty cars, get a xxxx discount on the new car, and if you planned on purchasing two vehicles before, you can now divide the discount given and pay for both of the xxxx $ less. do you see what i mean, or do i need to go further .... but many people got fucked over by not reading how is the discount they are given for their old cars being treated in the tax code.
"Saudi Arabia has been a long time number one supplier of crude oil to the US."
Huh? By my records they come ina distant fifth behind Canada, Mexico, Venezuela & Nigeria.
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_l...
This dovetails with another of CB's post on Iran. Venezuela ranks #3, if there is an attack on Iran my guess is that it will be coordinated with an attack on Venezuela. The Iran-Venezuela Axis is already a topic of discussion in some think tanks, so watch developments in Venezuela for a heads up,
The Emerging Axis of Iran and Venezuela -WSJ
"According to a report published by the Carnegie Endowment for International Peace in December of last year, Venezuela has an estimated 50,000 tons of unmined uranium. There is speculation in the Carnegie report that Venezuela could be mining uranium for Iran."
http://online.wsj.com/article/SB1000142405297020344010457440079283597201...
this consolidation of US bases in Colombia is important,
http://news.bbc.co.uk/2/hi/americas/8334045.stm
If you want to attack Venezuela, just stop buying their heavy crude. Only the US has the refining capability to use it. That will shut off their supply of dollars quite quickly and poor ol' Hugo will have more problems to think about in one of his 3 minute showers.
Only about 30% refining capacity in the US, see pie chart,
Refining
According to OGJ, Venezuela had 1.28 million barrels per day (bbl/d) of crude oil refining capacity in 2009, all operated by PdVSA. The major facilities include the Paraguana Refining Center (940,000 bbl/d), Puerto de la Cruz (195,000 bbl/d), and El Palito (126,900 bbl/d). Through PdVSA and its subsidiary CITGO, Venezuela also controls significant refining capacity outside of the country.
http://www.eia.doe.gov/cabs/Venezuela/Oil.html
touche. I didn't realize the homeland refineries had such a large capacity.
"Saudi Arabia has been a long time number one supplier of crude oil to the US."
actually a one year, well two years of not being no.1 does not make my original assessment untrue.
also, i didnt count canada, or mexico since i thought is implayed that i meant the overseas suppliers.
But thank you. This data will come useful when i write something about the broader picture concerning oil.
Matt Simmons wrote a book where he went into detail about KSA's declining production future (Twilight in the Desert), I wonder if that doesn't have something to do with it also.
Another possible aspect is currency related. If there is the potential for continuing $ devaluation, maybe at accelerating levels, wouldn't you rather spend some of your existing $ holdings/reserves, and cut back on selling your hard, dollar-proof assets?
Perhaps demand just isn't all there.
Thorough report Cheeky. Unfortunately, U.S. still needs, and must at some point, address a comprehensive and cohesive energy policy. 30+ years have gone by, and the U.S. has not produced ANY legitimate energy strategy. Good work...
Thus, we can all get free golf carts. Problem solved, courtesy of advanced education from Columbia University.
Check out the "Export Land Model" by J. Brown which states that as resources decline more will be kept at home for local consumption and secondary value added processing. Good find.......
WOW ..... nice find anon .... thank you for this .... you dont mind if i use this as a basis for one of my oil articles ....
If you didnt know about the export land model you might also want to read some of this: http://www.theoildrum.com/tag/saudi_arabia
Also have a look at the book 'twilight in the dessert'.
The drop in KSA oil production has long been predicted.
http://www.theoildrum.com/node/2331
There is also the fairly well backed up theory that once Saudi Arabian oil peaks, the worlds oil supply has also peaked.
CB, My guess is that the WTI-Brent spread is behind it,
"The WTI-Brent relationship changes seasonally and adjusts to local market conditions, but in a normal market WTI should sell at a premium to Brent and always at a premium to heavier, sour grades that are more difficult to refine into gasoline and diesel. Yet over recent weeks WTI has sold at a steep discount, often $10 below Brent and even below sour crudes, including the Opec basket and similar crudes from the Gulf of Mexico."
http://cachef.ft.com/cms/s/0/c0090624-ebc3-11dd-8838-0000779fd2ac.html
http://www.ft.com/cms/s/0/8cda145a-c3fe-11de-8de6-00144feab49a.html?ncli...
The US market is about 20% of total Saudi oil experts, they'll come back once they re-negotiate the contracts,
http://www.eia.doe.gov/emeu/cabs/Saudi_Arabia/OilExports.html
This is part of the global rebalancing (and probably the part that is working best!).
There is more domestic production in USA than in 2008, so there is less import and demand to recycle USD.
The SAK oil minister has indicated recently (in reference to Russia that surpassed SAK production), that if others want to deplete their resources, SAK is patient and in no rush.
I think overall this is part of a win-win game between USA and SAK, no accident, well coordinated, it has strategic and financial components.
Increase in domestic production? US oil production peaked in 1970, pretty much down hill every year since.
"well coordinated, it has strategic and financial components."
doubt it, the same way the housing was pumped up by the interest rates the energy use was pumped up by the abundance of cheap resources. Once it became expensive, (2005 and on) it's natural for consumers to seek a new balance and welcome energy efficiency measures.
CB, many thanks. It is enlightening.
Agree
As i have said many times in the comment section here on ZH, one of the main goals of this crisis was to lower foreign oil dependence. But what is interesting, well to me at least, is the sudden and unexplained drop which we are seeing right now. They could have easily decrease the imports over a longer time period, if for nothing else, than to make the whole scheme a bit less obvious.
There is the urgency to weaken Iran (and others like Venezuela, Russia). SAK and USA discussed over a year ago how economic war on Iran through oil is more productive.
It is a wonderful game being played, but make no mistake SAK is fully coordinating with USA.
But $80 oil is quite expensive at this point, and the Longs better remember that there is 5M barrel excess capacity out there that can be turned on quaickly, and most of it is in SAK.
don't always agree with yo. but today I will x 100.
excellent report.