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OPEC Stand Off As Saudi Arabia Tries To Help Obama's Reelection Chances By Hiking Crude Output; Iran, Venezuela, Iraq Not Convinced

Tyler Durden's picture


Contrary to ongoing wideranging skepticism, Saudi Arabia continues to posture that not only does it have substantial excess capacity, but that it will bring it online any... After all, Saudi owes the US a big favor (i.e., lower gas prices) in exchange for America's (or rather its Fifth Fleet) continued presence in Bahrain, which even those living in a cave know has been under a full media blackout to keep the ongoing religious tensions under wraps and keep the Saudi-Bahrain border safe (not to mention the Ghawar oil field). So even as Saudi had promised to hike its output as Libyian production went offline only for it to be discovered that the country had in fact lowered production, so now too the song and dance has hit fever pitch. Reuters reports that "Saudi Arabia is planning to lift oil output sharply in June, whatever policy OPEC adopts this week, in an effort to rein in high fuel prices. Riyadh expects to lift production by more than 500,000 barrels a day in June to its highest for three years, a senior Gulf industry official familiar with Saudi oil policy told Reuters." We can't wait to hear how Saudi's unilateral plan to boost Obama's reelection chances is met by other OPEC members such as Iran, Venezuela, Iraq and Libya. "Worried about the impact on economic growth of
inflated energy costs, Saudi will act alone if necessary to keep a lid
on prices now at $114 a barrel for benchmark Brent crude." Wait, isn't OPEC a "cartel", or a place where unilateral decisions are not allowed, for precisely this reason? Of course, at the end of the day, with recent Wikileaks disclosure that Saudi Arabia admitted it has overstated its reserves by some 300 billion barrels, or 40% of total, this latest ploy to push gasoline prices lower into the summer season will have a half life that is shorter than the SNB's FX intervention attempts.

From Reuters:

The biggest producer in the Organization of the Petroleum Exporting Countries, Saudi wants the cartel to lift formal output limits at a meeting on Wednesday to show consumer countries that it sees the danger to the economy of runaway oil prices.

So far it only has the support of its Gulf Arab allies Kuwait and the United Arab Emirates among the 12-member cartel.

"I expect OPEC to increase output during this meeting but I am still unsure how much," Kuwaiti Oil Minister Mohammad al-Busairi told Reuters.

"The market will be tight," said UAE Oil Minister Dhaen al-Hamli.

 Riyadh's production intentions may overshadow an OPEC meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits.

The Gulf producers want, at least, to close the 1.4 million bpd gap between OPEC's two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by OPEC in April at 26.2 million.

"There is a need for more supply in the market," said Kuwait's al-Busairi. "I expect demand to be strong in the third and fourth quarter, the demand will mainly come from Asia."

There is strong opposition to any production increase from price hawks Iran and Venezuela, with most neutral countries yet to show their hand.

One of them, Iraq, said it was happy with the market as it stands.

"In my opinion the current level is not too high," said Iraqi Oil Minister Abdul-Kareem Luaibi of $114 Brent. "Recent indications from the oil market as far as the stocks and supplies is good -- there is good supply."



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Tue, 06/07/2011 - 10:28 | 1346717 Alcoholic Nativ...
Alcoholic Native American's picture

Camel Fuckers FTW.

Tue, 06/07/2011 - 10:36 | 1346735 BigMike
BigMike's picture

Fuck you

Tue, 06/07/2011 - 11:14 | 1346872 russki standart
russki standart's picture

Noooooo! Fock you!

Tue, 06/07/2011 - 10:36 | 1346736 Internet Tough Guy
Internet Tough Guy's picture

They certainly have you over a barrel, Mr. western oil importer. Do you have one hump or two?

Tue, 06/07/2011 - 10:40 | 1346770 Alcoholic Nativ...
Alcoholic Native American's picture

For your information, I don't even drive.  I bike everywhere.  I'm smug like that.

Tue, 06/07/2011 - 10:59 | 1346828 mickeyman
mickeyman's picture

Naturally you don't use any asphalt roads when you cycle. You go cross country.

Tue, 06/07/2011 - 11:00 | 1346842 Ahmeexnal
Ahmeexnal's picture

And your bike's tires are made of fucking wood?
And you ride on golden roads instead of asphalted ones?

Tue, 06/07/2011 - 11:30 | 1346939 JW n FL
JW n FL's picture

he uses water to lubricate the chain and sprocket!

he uses gold handle bar grips!

he wears natural fiber hemp when biking.. the seat is made of silver, as to not communicate bacteria / viruses.


that has got to chaffe his ass! all the time!

Tue, 06/07/2011 - 13:20 | 1347384 camaro68ss
camaro68ss's picture

o man you guys make me lol

Tue, 06/07/2011 - 10:35 | 1346730 LawsofPhysics
LawsofPhysics's picture

Energy independence will come to America one way or another.  That "deal" that was forced upon the middle east in the 70's by the baby boomers can no longer be enforced and is coming to an end.  Just wait until oil is no longer priced in dollars.  If you have not already hedged accordingly, it may be too late to do so.

Tue, 06/07/2011 - 11:22 | 1346731 TruthInSunshine
TruthInSunshine's picture

Obama's new re-election campaign slogan for 2012:

'$1.79 per gallon gas and $55 per hour, 9-4 government jobs as cartographers with full bennies and a full pension at 52 for those who didn't get any of the Hope or Change. I pinky promise swear. 4 more years?'

Tue, 06/07/2011 - 10:39 | 1346737 css1971
css1971's picture

I for one aplaud Saudi's decision. Bravo! Bravo! <claps enthusiastically>

I'm looking forward to purchasing oil and other commodities at temporarily bargain basement prices.

God I love politics and politicians. Don't get me wrong, I hold both in utter contempt, but they are just so predictable.


Tue, 06/07/2011 - 10:36 | 1346739 Flakmeister
Flakmeister's picture

Jawboning at its finest... I think the Fed took the PR course offered at KSA-U

Tue, 06/07/2011 - 12:12 | 1347124 trav7777
trav7777's picture

concur 100%....jawboning or surge production in heavy sour

Tue, 06/07/2011 - 10:36 | 1346752 e1618978
e1618978's picture

OPEC only really matters when the price is low, they can cheat all they like at $100/barrel. 

Tue, 06/07/2011 - 10:37 | 1346755 Spastica Rex
Spastica Rex's picture

Saudi Arabia Tries To Help Obama's Reelection Chances

Do the Saudis prefer the Democrats? Is there a possible American president who won't do what they want?

Tue, 06/07/2011 - 12:18 | 1347150 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yeah, the Israeli run U. S. Government is doing what the Saudis want. Ha, ha.  Hell, we might as well move our nation's capital to Tel Aviv!



Tue, 06/07/2011 - 13:55 | 1347486 Spastica Rex
Spastica Rex's picture

I hear you, but the interests of Israel and the House of Saud don't seem to be too much in conflict at the present moment.

Wasn't it Donald Trump who said something like, "If I'm president, I'll just go take all our oil lying under the ragheads' sand, darn tootin' I will!"

Not a possible president.



Tue, 06/07/2011 - 13:05 | 1347313 Problem Is
Problem Is's picture

Obama Bin Lyin' bowed down to King Abdulla...

A harlot like Palin McMILF can be bought any day with sovereign wealth fund expenditures like so many concubines...

Ditto the eunuch Willard Romney...

Tue, 06/07/2011 - 10:37 | 1346756 DaveyJones
DaveyJones's picture

"Iraq is not convinced" of a lot of things

Tue, 06/07/2011 - 10:41 | 1346761 hedgeless_horseman
hedgeless_horseman's picture

Et vous, le Canada?

Total Imports of Petroleum (Top 15 Countries)
(Thousand Barrels per Day) Country Mar-11 Feb-11 YTD 2011 Mar-10 YTD 2010 CANADA 2,666 2,831 2,773 2,517 2,535 MEXICO 1,319 1,104 1,269 1,265 1,178 SAUDI ARABIA 1,108 1,114 1,108 1,149 1,007 VENEZUELA 1,067 989 1,030 1,061 993 NIGERIA 913 978 966 962 970 RUSSIA 690 437 556 488 459 ALGERIA 500 394 489 455 472 COLOMBIA 399 211 318 251 318 IRAQ 382 263 375 475 506 ANGOLA 280 370 320 502 371 UNITED KINGDOM 197 110 155 267 318 BRAZIL 161 177 205 302 296 KUWAIT 161 118 143 218 173 NORWAY 156 69 104 59 94 VIRGIN ISLANDS 149 182 203 228 243


Tue, 06/07/2011 - 10:48 | 1346782 mayhem_korner
mayhem_korner's picture

Is there a reason the U.S.'s 9M bbl/day is not on this chart?

Tue, 06/07/2011 - 10:49 | 1346790 hedgeless_horseman
hedgeless_horseman's picture

It is a list of exporters to the US.

Canada remained the largest exporter of total petroleum in March, exporting 2,666 thousand barrels per day to the United States, which is a decrease from last month (2,831 thousand barrels per day). The second largest exporter of total petroleum was Mexico with 1,319 thousand barrels per day.


Tue, 06/07/2011 - 10:47 | 1346792 magis00
magis00's picture

It's really cute that Venezuala is 4th.

Tue, 06/07/2011 - 10:48 | 1346797 mayhem_korner
mayhem_korner's picture

Thx.  My bad...

Tue, 06/07/2011 - 11:10 | 1346848 hedgeless_horseman
hedgeless_horseman's picture

At $100/bbl, just add two zeros to the data and my guess is that this chart becomes a pretty good approximation of the top importers of US Dollars, and thus inflation, less China and Japan.

What is Hugo doing with all of those US Dollars? 

Also, someone please direct me to the country on this list that is doing so well that it is not already maximizing production, and thus income.

Tue, 06/07/2011 - 12:10 | 1347131 trav7777
trav7777's picture

we don't produce 9mbpd and haven't for like 30 years...we're around 6 now

Tue, 06/07/2011 - 14:29 | 1347633 Flakmeister
Flakmeister's picture

I am jealous.... I want to be able to post figures!!

Tue, 06/07/2011 - 16:22 | 1348249 css1971
css1971's picture

Hey! I just noticed something!


Does that look like a peak to anyone else?



Tue, 06/07/2011 - 11:04 | 1346846 Cheeky Bastard
Cheeky Bastard's picture

Virgin Islands? I presume they're in this select group because of all the trading companies set up there to move the crude from REAL producers?

Tue, 06/07/2011 - 11:34 | 1346959 JW n FL
JW n FL's picture

Shhhhhhhh..... we dont discuss off shore irrevocable trusts in mixed company Cheeky.. really, you know better.

Tue, 06/07/2011 - 11:48 | 1347009 hedgeless_horseman
hedgeless_horseman's picture

St. Croix is home to HOVENSA, one of the world's largest oil refineries.  This chart is for total petroleum imports, which includes gasoline.

Tue, 06/07/2011 - 11:12 | 1346860 Kevin... Who su...
Kevin... Who suffers from Cassandras curse's picture

If you go to the site, at the bottom you will find this, which he didn't put in.

Tue, 06/07/2011 - 10:39 | 1346767 mayhem_korner
mayhem_korner's picture

When should we expect the next "reducing our dependence on foreign oil" speech, Mr. Prezident, sir?

Tue, 06/07/2011 - 10:40 | 1346769 RobotTrader
RobotTrader's picture

Gasoline prices have totally collapsed in L.A. from $4.40 to $3.79/gal.

Peak Oil nowhere to be found, 4 years after we heard:

"John, I've ready 281 books on Peak Oil, and I can assure you....."

"Every quarter, we get a new report like the BP Statistical Review that says....."

"Production is declining, car sales in China are booming....."

"Soon, we will have gas lines, rationing, etc........."

"Within 90 days, a big gooey blob in the Gulf of Mexico will land ashore and ruin thousands of miles of coastline....."



Tue, 06/07/2011 - 10:52 | 1346807 Spastica Rex
Spastica Rex's picture

Your troll-fu is ghey.

Tue, 06/07/2011 - 11:18 | 1346885 DaveyJones
DaveyJones's picture

are all your price quotes off by 20 cents?

Tue, 06/07/2011 - 11:45 | 1347008 Idiot Savant
Idiot Savant's picture

Now you're just being a dick, RT.

Gasoline prices have totally collapsed in L.A. from $4.40 to $3.79/gal.

Congratulations, you've been conditioned by big oil, much like Pavlov's dogs, and now perceive $3.79 to be a collapse.

Peak Oil nowhere to be found - Right, BP is drilling a mile under the ocean surface, and then an additional three to five miles into the crust, because the world is awash in easily retrievable oil. /sarc/

"Within 90 days, a big gooey blob in the Gulf of Mexico will land ashore and ruin thousands of miles of coastline....."

Would have happened if it wasn't for the hundreds of thousands of gallons of Corexit dumped in the gulf. We won't know the effects of these chemicals on the ecosystem for years to come.

Tue, 06/07/2011 - 11:59 | 1347075 MisterMousePotato
MisterMousePotato's picture

I agree with your other points; however, this?:

"Right, BP is drilling a mile under the ocean surface, and then an additional three to five miles into the crust, because the world is awash in easily retrievable oil. /sarc/"

If you read ZeroHedge, then surely you know why BP is/was drilling where it is/was? The reasons are more an outgrowth of (bad) politics than geology.

Tue, 06/07/2011 - 12:20 | 1347156 Idiot Savant
Idiot Savant's picture

The reasons are more an outgrowth of (bad) politics than geology.

I'm an avid ZH reader, but am unaware of the politics involved in with the DH. A link or explanation would be appreciated.

I thought it was about new reserves, profit, and tapping the Tiber oil field.

Tue, 06/07/2011 - 12:56 | 1347286 Flakmeister
Flakmeister's picture

Umm, so what was the politics that made them drill the Macondo? I suggest you read up on a project called Thunderhorse and how it performed.

Tue, 06/07/2011 - 10:41 | 1346772 101 years and c...
101 years and counting's picture

it's ZH's stance that the economy is in the toilets...yet oil demand is surging.  ROFL.


Tue, 06/07/2011 - 10:51 | 1346796 rdenner
rdenner's picture

Every time that the economy surges, oil prices sky rocket.. There is no more spare capacity that OPEC or anyone else can deliver. Now whether that is Peak Oil or an unwillingness of those holding oil to sell at the low prices(sub 100) is of little consequence.. The reality is that it sows its own demise... Economy heats up, prices rise and hits a ceiling as production does not ramp up to meet demand... Demand crosses supply and we have a pricing disconnect... This causes the economy to sputter and reverse into recession.. Oil prices dislocate to the downside setting up another recovery... This is happening on a faster and faster cycle.. we are now cycling in and out of recessions on a nearly 12 month schedule and it is compressing even more as we speak.



Tue, 06/07/2011 - 10:58 | 1346839 css1971
css1971's picture


God damn it. Don't tell everyone. I'm making 50% pa on this.


Tue, 06/07/2011 - 11:07 | 1346853 MachoMan
MachoMan's picture

It's not an economy surging, it's the flogging of the dead economic horse via concentrated stimulative efforts (dishonest at best) to club members...  dollar devaluation and fear of dollar devaluation (outpacing demand) causes oil to increase in price per dollar...  but yes, to the extent the economy would organically heat up, the price of oil provides a hard ceiling.

Tue, 06/07/2011 - 11:04 | 1346854 DaveyJones
DaveyJones's picture

we're like hamsters really except they're not as stupid 

Tue, 06/07/2011 - 11:51 | 1347054 Ace Ventura
Ace Ventura's picture

LOL! Great, now I've got copious amounts of nose-spewed water to clean off the monitor!

Nominate for best comment on this thread!

Tue, 06/07/2011 - 11:07 | 1346851 Cheeky Bastard
Cheeky Bastard's picture

China demand offsets the decline in western economies. It is now the largest energy consumer in the world, and consumes more bpd than US did at it's peak in late '07. You know, USA is not the only fucking economy on the planet.

Tue, 06/07/2011 - 11:07 | 1346857 DaveyJones
DaveyJones's picture

but we like to pretend we are. We have big guns too. Welcome back Cheeky hope you're feeling well.

Tue, 06/07/2011 - 11:20 | 1346896 rdenner
rdenner's picture

Absolutely NOT TRUE

# 1   United States: 18,690,000 bbl/day   2009  # 3   China: 8,200,000 bbl/day   2009 

 It's not even close... You are talking about electrical production which they produce by burning domestic coal.... Oil on the other hand is by and far and away used by the United States...... And the above commentator is correct.. Any attempt by the US to cut oil usage will be met by China gobbling up that spare capacity immediately.... It's called Jevon's Paradox...



Tue, 06/07/2011 - 11:37 | 1346973 JW n FL
JW n FL's picture


The Business of Climate Change Conference 2009


watch, listen and learn.

Tue, 06/07/2011 - 13:35 | 1347426 Coast Watcher
Coast Watcher's picture

"it's ZH's stance that the economy is in the toilets...yet oil demand is surging.  ROFL"

Global oil demand is increasing, although not a quickly as originally forecast. The EIA cut global oil demand estimates by 120,000 bpd last month and another 100,000 bpd this month. Demand in the United States has dropped in the last couple of years because of hte depression. China and India have more than made up for the decline, though.

Tue, 06/07/2011 - 10:45 | 1346776 rdenner
rdenner's picture

This is THE DOMINO that cannot fall.. If OPEC backs away from the USD or if OPEC decides it won't(or more likely CANNOT!!) increase production, it by definition means the end of GDP growth in the west.. And without GDP growth we are looking at a permanent round of Recovery/Recession/Depression/Recovery events... One on top of the other and happening on cycles measure in months/years.. Not Years/Decades like in times past.


The new normal is upon us.

Tue, 06/07/2011 - 10:51 | 1346793 Jack Burton
Jack Burton's picture

 NATO has stepped up the push to get Libya's oil. Daylight bombing raids were added to their bag of Oil Liberation Tactics. The idea that the west is interested in helping the Libyan people is a hoax. More like help them pump lots of oil at cheap contract prices to the western oil companies. Transparent oil wars. Like Iraq was about liberation. If you got oil and don't play ball, the bombers are in the air.

Only oil producing Russia can thumb their noses at NATO. Why? A survivable nuclear weapons system. Russia spends the money to keep an ability to smoke the west to ashes. Sadly, that is what it takes to ensure national security against the NATO Oil Liberation Armies.

Tue, 06/07/2011 - 10:58 | 1346821 Alcoholic Nativ...
Alcoholic Native American's picture

They are dragging the war out so the west can sell its surplus munitions and weapons to the rag tag rebels so they can shoot them wildly into the air acomplishing jack and shit.  War is a racket.

Tue, 06/07/2011 - 10:57 | 1346818 HamyWanger
HamyWanger's picture

Well, it confirms what I've said. Peak oil is fantasy. Saudis can hike their output whenever they want. On the other hand, Peak Doom is approaching. 

Tue, 06/07/2011 - 11:07 | 1346852 LawsofPhysics
LawsofPhysics's picture

Peak stupidity, troll.

Tue, 06/07/2011 - 11:28 | 1346930 rdenner
rdenner's picture

Wow is that what it shows/??


I think I see Saudi Arabia at its lowest production totals in decades in an environment where they could be selling SHIT LOADS of oil for 110 dollars a barrel(the highest price in 3 years)... So where exactly does your fucked up logic show that Peak Oil is a fantasy... OHHHH I missed the part where you believed Saudi Arabia and their mouthpiece at OPEC... LOL.. I am with ya.. Sorry for the confusion.



Tue, 06/07/2011 - 11:33 | 1346953 rdenner
rdenner's picture

here are KSA's production totals dating back to 1980.. They are not even producing what they produced in 1980... And notice the year 2005???? They peaked out just before the oil price spike of 2006/07... Even in the face of climbing oil prices they are not "turning on the spigot" as they claim they can do at their leisure... KSA is washed up as the big bully of OPEC... The non-KSA members of OPEC are back in the drivers seat.. First time since the 1970's...


1980 9,900.00 NA 1981 9,815.00 -0.86 % 1982 6,483.00 -33.95 % 1983 5,086.00 -21.55 % 1984 4,663.00 -8.32 % 1985 3,388.00 -27.34 % 1986 4,870.00 43.74 % 1987 4,265.00 -12.42 % 1988 5,086.00 19.25 % 1989 5,064.00 -0.43 % 1990 6,410.00 26.58 % 1991 8,115.00 26.60 % 1992 8,331.70 2.67 % 1993 8,197.81 -1.61 % 1994 8,120.00 -0.95 % 1995 8,231.23 1.37 % 1996 8,218.08 -0.16 % 1997 8,362.03 1.75 % 1998 8,388.90 0.32 % 1999 7,833.39 -6.62 % 2000 8,403.80 7.28 % 2001 8,031.10 -4.43 % 2002 7,634.40 -4.94 % 2003 8,775.00 14.94 % 2004 9,100.82 3.71 % 2005 9,550.14 4.94 % 2006 9,152.33 -4.17 % 2007 8,721.51 -4.71 % 2008 9,261.25 6.19 % 2009 8,250.11 -10.92 % 2010 8,500.27 3.03 %
Tue, 06/07/2011 - 11:06 | 1346843 CrashisOptimistic
CrashisOptimistic's picture

Mild heads up about OPEC-speak on this.

It's pretty common for OPEC countries, mostly KSA, to take advantage of translation issues and announce "bringing new production online of XXXXX bpd."

And they do.  That new production comes online.  The issue that is not discussed is old production that goes offline via natural decline.

Announcements like this are not net.

Tue, 06/07/2011 - 11:09 | 1346861 apberusdisvet
apberusdisvet's picture

The Saudi's are scared shitless that they will be the target of the next "humanitarian" intervention.  I'm sure they have already set up an offshore account for the Obama family; Hillary already has hers.

Tue, 06/07/2011 - 11:22 | 1346917 rdenner
rdenner's picture

Good luck on making them understand Depletion Models.... I got into a heated argument about US Production.  He said that there was X amount of new production just waiting to be tapped.. And he went though all this math gymnastics to show how close we could come to our current consumption numbers.... But he failed to show two things... First it would take 5 to 7 years to get that much capacity on line.. And he failed to take into consideration that there is a natrual 7 to 8% decline in existing fields in the United States that has ZERO to do with envirowhackos... It is the nature of oil production..


So his math didn't look so promising when it was placed up against depletion models.. LOL..



Tue, 06/07/2011 - 11:30 | 1346957 CrashisOptimistic
CrashisOptimistic's picture

That's the first order truth.

A second and third order analysis notes that the latest hype for production is about the "side effect" oil.  This is oil being produced from horizontal fracing natural gas wells.  They drill for gas in shale, and there's some oil forced out by gas pressure.  In fact, it's the oil that pays for the whole thing (oil/gas seperators at well head or downstream are not cheap).

But what is not calibrated properly is the industry, though it doesn't talk about it, know that oil wells have a natural 5-7% decline as pressure reduces, and as the field empties of recoverable oil.  That calibration is being instinctively applied to these horizontals.

It's wrong.  The horizontals deplete oil at 35%/yr.  There are some wells that go from 1000 bpd to 3 bpd in a few months.  The industry's instincts aren't assimilating that.  They still punch up their numbers at 6% production decline, and it this that leads them to think they can get up to 1 mbpd from total shale oil (not oil shale) sources.

They can't and won't.  Now understand that this whole thing is not evil conspiracy.  If you were in the business to drill for oil and discover it and sell the lease at profit, your total focus would be on NEW PRODUCTION, too.  This is what gets PR releases.  This is what gets reported from interviews.

Nobody but cap-and-abandon service firms makes money from depletion and they are the red-headed stepchild of the industry.  They get no publicity.

Tue, 06/07/2011 - 11:40 | 1347007 rdenner
rdenner's picture

That's where the common person has a problem with assigning the correct location of the "conspiracy". They see Peak Oil as a conspiracy being headed up by BP and Shell to pump up the price of oil at the pump..


If they would spend two minutes understanding how BP and the rest of the western producers make their money, they would understand that it has EVERYTHING to do with new/potential wells under their control.. It is all about RESERVES. That is where their stock prices get their boots, by pumping up reserve numbers. It is why the Big Oil interests are adamantly opposed to the idea of Peak Oil leaking out into the mainstream...


Fraking is the new holy grail, just as Shale was 18 months ago as was Bio Diesel was 24 months ago... The Big Oil companies do not want Peak Oil to be realized, lest the "investing" public punishes their companies by selling off their stock.... The Big Oil companies are spending BILLIONS on finding new and innovative ways to get at oil(or even SHALE, which isn't even oil, but now they call it SHALE OIL!!!)....  Big Oil will be the last to admit to Peak Oil out of pure survival... 



Tue, 06/07/2011 - 12:18 | 1347158 trav7777
trav7777's picture

the deeper the well and the farther offshore, the quicker is the time to peak and the steeper is the decline.

This was in IEA's world oil forecast.  Decline rates for the old Texas fields were the 3% base case.  After they started jacking up production to trapezoidal curve shapes with all that TECHNOLOGY that the idiots say is going to save us (it just depleted faster), the decline rates have risen.  Offshore deepwater fields peak quick and fall 15% YoY at least.

Every field I've looked at has had a steeper decline curve than was predicted. 

Tue, 06/07/2011 - 11:24 | 1346927 hedgeless_horseman
hedgeless_horseman's picture

It's true...just ask the Bush family.

Tue, 06/07/2011 - 12:08 | 1347112 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

The Saudis have already run into the arms of the Pakistanis who have run into the arms of the Chinese.  The U.S. still has it sights on overthrowing the Saudi regime.  That will be the last domino to fall according to Globalists plans per Dr. Webster Griffin Tarpley.


Tuco Benedicto Pacifico Juan Maria Ramirez

Tue, 06/07/2011 - 11:16 | 1346877 TruthInSunshine
TruthInSunshine's picture

The Saudis can 'print' any number on production they desire, in similar fashion as Bernanklestein on everything having to do with our economic metrics.

If it's spoken, written or printed (especially from esteemed entities such as the BLS or Federal Reserve, or their proxy media pundits), it must be true, bitchez!

Tue, 06/07/2011 - 11:16 | 1346880 malikai
malikai's picture

BRN/WTI spread now at 17+, ratio 1.17+. Spread is a new high for the year if we close at this level..

Tue, 06/07/2011 - 11:25 | 1346913 CrashisOptimistic
CrashisOptimistic's picture

This is item 2 that is being missed, and it's absolutely critical.

Imports are priced in Brent, not WTI.  Have a look at Delta Airlines stock in a year to date that the S&P is up 3%.

Tue, 06/07/2011 - 11:30 | 1346954 malikai
malikai's picture

It sure is convineant that WTI is the number they show on the TV, isn't it?

Tue, 06/07/2011 - 11:34 | 1346977 r101958
r101958's picture

rdenner is absolutely correct. One other factoid that we may want to consider. SA has above ground reserves located in various spots around the world. They could release some of that and it would 'appear' that they had increased real production.

Tue, 06/07/2011 - 11:55 | 1347067 rdenner
rdenner's picture

Can you give me a source for this please.... I have not heard that before and I though I knew everything.. LOL.... Thanks if you are able to do this...



Tue, 06/07/2011 - 12:22 | 1347170 r101958
r101958's picture

Thanks for helping with that Flak. If you google this: 'Saudi oil storage okinawa', you will see much available about just one such facility. This facility will/is storing 3.6m Brls. So, SA could release from this storage 300k oil per month for 6 months and tell everyone that they are 'producing' more oil.

Tue, 06/07/2011 - 13:53 | 1347480 Coast Watcher
Coast Watcher's picture

This aboveground oil storage has been the dirty little secret of Saudi "production increases" since at least 1999. SA doesn't open new wells, it just releases oil from storage. It's been very effective at masking true production numbers.

Tue, 06/07/2011 - 14:29 | 1347613 Flakmeister
Flakmeister's picture

No, it is not that bad... they have brought on Haradh and Kurais while  Abqaiq and others have declined...Manifa is coming, but that requires a special refinery because of the Vanadium in the oil...

Seriously, the Saudi's have done an exemplary job on their fields, if SA had not exercised the stewardship that they have on the world's greatest oil deposit, we would be even worse off....

Tue, 06/07/2011 - 15:12 | 1347820 Coast Watcher
Coast Watcher's picture

Flak, no argument that SA has brought on new fields as old ones declined. My reference was to those times when it declares it's going to "increase production" immediately to meet emergency requirements. During the run-up in prices in the winter 1999-2000, for example, and several times since then.

Tue, 06/07/2011 - 12:06 | 1347102 Flakmeister
Flakmeister's picture

Learnt something recently that helps explain the WTI Brent spread...

The definition of WTI is based on API specific gravity and Sulfur content. I presume that people understand what "condensate" and "wet gas" are. Condensate production is rising as it is a by product of the shale NG plays (in fact the production of the shale NG is focused on those areas that are wet). Now, the pipeline guys are blending Alberta Tar sand syn-crude with light sweet condensate to satisfy the WTI requirements. The catch is that this blend is a poor substitute for real WTI (from the Permian Basin). When you analyze the refining yields, the blended stuff comes up short....

Call it the hedonistic adjustment to the quality of crude oil....almost forgot, there was a time (quite recent) when pipelines would never blend products of different quality...

Tue, 06/07/2011 - 12:17 | 1347146 malikai
malikai's picture

So they're blending the bitumen with condensate to satisfy the API requirement, presumably as part of the upgrading process. Condensate must be cheap these days.

I would expect this to increase the cost of syncrude and lessen the desire to price it to WTI. I'd reckon that TransCanada may be unhappy with their choice to terminate Keystone in Cushing. They really should have gone west with that project. They are at the mercy of the Cushing/WTI masters.

I just cannot grasp why one would sell a more expensive (EROEI) product to an artificially suppressed market?

EDIT: Granted, it wasn't suppressed like it is now when they made the choice to put Keystone in. But I'd imagine some shenannigans might be uncovered if there was ever a real investigation into the decisions made for that project.

Tue, 06/07/2011 - 12:23 | 1347175 Flakmeister
Flakmeister's picture

 I don't have enough details to do a full analysis, but at first blush my take is that the WTI price is driven by the value of the refined products which is less for the blend and the blend is dominating the supply. So the guys getting squeezed are the producers of high quality oil that are tied to a Cushing delivery.

Condensate prices have converged to the relative BTU content (wrt to real crude).... Historically condensate is a feedstock for the plastics industry (e.g. ethane)

Tue, 06/07/2011 - 12:41 | 1347228 r101958
r101958's picture

Flak, I would be interested to know what the daily turnover of oil is at Cushing. My guess is that it is not that much and if compared to total world use it is probably very small. Hence the real meaningless of WTI price. The real gauge of true world oil price is Brent.

Tue, 06/07/2011 - 12:48 | 1347249 Flakmeister
Flakmeister's picture

Back of the envelope WAG is 3-4 mmbpd...

As for Brent, I agree completely. The price for oil that I can load on my tanker and take anywhere...

You are aware that Brent is an inferior crude to WTI? Once upon a time you could satisfy a WTI delivery with Brent with a 1-2% discount to the WTI price....

Tue, 06/07/2011 - 12:26 | 1347184 Flakmeister
Flakmeister's picture

A quibble.... the bitumen has been turned into syncrude way up the line. It is the syncrude being further blended. If I was a producer of real WTI quality oil, I would be furious....

Tue, 06/07/2011 - 12:31 | 1347205 r101958
r101958's picture

Also, Cushing only has a storage capacity of 44 million brls. So, more smoke and mirrors where price is concerned.

Tue, 06/07/2011 - 12:07 | 1347120 equity_momo
equity_momo's picture

this is comedy gold. OPEC are sucking the scum off the bottom of each barrel , theyre out.  Not even the IEAs collusion can help the statistics restrospectively.

Tue, 06/07/2011 - 12:13 | 1347145 nathan1234
nathan1234's picture

Saudi's have been bluffing about their reserves and capabilities.And if the Shiites in the Ghawar oil area riot , egged on by Iran, we would be seeing shortages

Tue, 06/07/2011 - 12:36 | 1347210 r101958
r101958's picture

I submit that Ghawar has peaked and is in decline and SA is desparate to keep that from becoming general knowledge.

Tue, 06/07/2011 - 12:56 | 1347285 Problem Is
Problem Is's picture

it is interesting that the Saudis have announced increased production several times in recent years...

But never are actually able to produce more...

Of course the hot tub drowned Matt Simmons wrote the authoritative volume on Saudi oil production based on petroleum engineering technical manual publications by Saudi Aramco engineers...

Twilight in the Desert

Tue, 06/07/2011 - 14:28 | 1347596 jmc8888
jmc8888's picture

500,000 + Libya's amount = ~0 more barrels a day?

Paper oil to help Nerobama?  Somehow I doubt it.

Someone should tell Riyadh the following quote from Bad Santa....."Why don't you wish in one hand, and shit in the other. See which one fills up first."


Tue, 06/07/2011 - 14:38 | 1347663 AldoHux_IV
AldoHux_IV's picture

The sooner we are off of oil for energy, the better. Helps keep the power out of such dubious hands, but of course this is one of many problems we face in that regard: IMF, Worldbank, central banks, finance ministers, banking cartels, etc.

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