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Rejected: Saudi Oil Minister Saying OPEC Is Not Considering An Extraordinary Meeting

Tyler Durden's picture





 

Today's rumor mill will apparently focus on whether OPEC will or will not miraculously push the "gush" button. After earlier we reported rumors that OPEC would raise oil supplies, and quoted the Kuwait oil minister, now the Saudi oil minister was caught on tape saying there will NOT be an extraordinary meeting. Which means that the Italian guy was spreading false rumors. Which means that whatever the offer for Italian CDS is, it is cheap. WTI, naturally, rallies on the news.

Obviously, alternative measure of printing oil will now have to be evaluated. Below is an artist's impression of just one of these (and yes, it is Kool-Aid flavored - which means that yes, you can eat, er drink, it).

via: William Banzai

 


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Tue, 02/22/2011 - 09:49 | Link to Comment Hammer Time
Hammer Time's picture

no more oil, no more meetings

Tue, 02/22/2011 - 09:52 | Link to Comment Flakmeister
Flakmeister's picture

There is no "gush button" to push... Libya going offline for any extended period will reveal that the Saudis are like the emperor with no clothes. Claims of 5 mmbpd spare capacity are wildly exaggerated. The kingdom has about 1 mmbpd of spare heavy sour production for which there is no refining capacity..

Tue, 02/22/2011 - 09:58 | Link to Comment sushi
sushi's picture

They also need the incremental revenue so they can provide bennies to buy off the locals while at the same time upping their spending on tear-gas, water cannon and XIE in mufti.

Tue, 02/22/2011 - 09:52 | Link to Comment HoofHearted
HoofHearted's picture

There's a whole flock of black swans...just over to the east...

Tue, 02/22/2011 - 09:54 | Link to Comment eigenvalue
eigenvalue's picture

The Saudi king is worried about his throne at the moment and has no time for anything else.

Tue, 02/22/2011 - 10:01 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Abdullah doesn't want to appear as lackey of the US. hehe.

Tue, 02/22/2011 - 10:08 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Corrected to read.

Abdullah doesn't want to appear as an even greater lackey of the US. hehe.

Tue, 02/22/2011 - 10:30 | Link to Comment NumberNone
NumberNone's picture

Didn't even lie about the possibility of studying the possibility of an emergency meeting in order to at least suppress the rise temporarily.   Just a big F-U back at Ben Ber$ank for running the printing presses non-stop

Tue, 02/22/2011 - 09:54 | Link to Comment FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Didn't i read somewhere that the U.S. economy "couldn't handle" oil prices being above $90 a barrel? Anyone got proof of that?

And seeing as the Bernank has killed the dollar in recent years, is that figure still $90?

Tue, 02/22/2011 - 09:57 | Link to Comment 101 years and c...
101 years and counting's picture

The depression started in Oct, 2007.  The exact same month oil hit $80.  No coincidence.

Tue, 02/22/2011 - 09:54 | Link to Comment koeleköpke
koeleköpke's picture

if food becomes more expensive, the saudis and fellows have to increase the oilprice in order to buy peace. 

Tue, 02/22/2011 - 09:54 | Link to Comment papaswamp
papaswamp's picture

Whooops...

The 4 Americans held hostage by Somali pirates have been killed; U.S. Navy killed or captured most of the pirates - CBS

Tue, 02/22/2011 - 10:00 | Link to Comment ColonelCooper
ColonelCooper's picture

While I certainly am not "pro-pirate", I would nominate anyone yachting off the Somali coast for a Darwin award.

Kind of like backpacking on the Iraqi-Iranian border.....

Tue, 02/22/2011 - 10:10 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

They were hundreds of miles from the Somali coast; those pirates have reach. I nominate you for Humanitarian of the Year award.

Tue, 02/22/2011 - 10:17 | Link to Comment ColonelCooper
ColonelCooper's picture

Reported as off Somali Coast.  Guess I'm not surprised at bad info. anymore.  Either way, I would classify "regional" yachting as a dangerous hobby.  This is hardly the first time this has happened.

BREAKING NEWS: Cigarettes are bad for you.

Tue, 02/22/2011 - 12:18 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Anyone yachting in the area who isn't packing at least one .30 cal MG on a pintle mount is f'ing nuts.

Tue, 02/22/2011 - 10:22 | Link to Comment tonyw
tonyw's picture

Unfortunately the Somalian's have invested in their business and now have bigger support ships so they can go further and stay out for longer.

Tue, 02/22/2011 - 09:55 | Link to Comment Thomas
Thomas's picture

Fat Finger or Fat Lips?

Tue, 02/22/2011 - 09:56 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Slam! Another door closes (apparantly anyways). Oil Shock, Version II.

Version One made some giants of fleas (Japan for one, Korea Another, the old partner pump, yet another pump and bump scheme).

This one will slay some giants.

Giant Slayer japanese anime movies come to mind.

ORI

http://aadivaahan.wordpress.com/2011/02/21/through-a-lens-darkly/

 

Tue, 02/22/2011 - 09:57 | Link to Comment Twindrives
Twindrives's picture

Assclown Obama pissed the Saudi oil ministers off with his stupid comments about Hosni.  

 

Now we'll all pay.  Way to go douchebag. 

 

 

Tue, 02/22/2011 - 10:05 | Link to Comment JLee2027
JLee2027's picture

Who goes out the door first? Obama in 2012 or the House of Saud?

Tue, 02/22/2011 - 10:21 | Link to Comment MrBoompi
MrBoompi's picture

Libya produces 3% of the world's crude. If we can't get through a 3% reduction without causing a price catastrophe we truly are fucked. BTW, tell me any country that is happy with the US dollar these days. If Obama's a douche, there were many presidents and thousands of other government employees before him that were douches as well. Obama may be a puppet, but he's not totally to blame for the sorry state of the world's economy.

Tue, 02/22/2011 - 10:27 | Link to Comment tonyw
tonyw's picture

The issue is that price is set on the edge, so how much someone will pay not to have their oil supply dropped. So a 3% supply drop can trigger a price rise of more than 3%, think of it this way how much would it have to go up for you to be willing to give up your usage. Over here in yoorop we're already paying $8/gallon, I'd be quite happy to pay double that especially if there were fewer cars on the roads:-)

Tue, 02/22/2011 - 11:42 | Link to Comment CPL
CPL's picture

Oil prices don't work that way on the ground.  At least not in Canada.  70% of the pump price is government taxes.  In the case of rising oil prices the government is always in favor of the oil prices rising because the scale slides up in terms of tax recipts.  Saddly when Oil is priced in at $110 per barrel, the GoC actually makes more in tax recipts from oil than all the income tax collected from it's population base.  I would include the usual federal sales tax and provincial on everything else, but it really makes you wonder at what point does a government stop taxing it's population.

 

What gets me is why don't people that produce things, make businesses just simply opt out of the government ponzi system altogether.

Tue, 02/22/2011 - 11:51 | Link to Comment Flakmeister
Flakmeister's picture

Oil demand price inelasticity is the order of 0.07, IIRC, 1% drop implies a 14% rise

Tue, 02/22/2011 - 09:59 | Link to Comment johnQpublic
johnQpublic's picture

i bought the rumor before i didnt buy the rumor

Tue, 02/22/2011 - 10:00 | Link to Comment Caviar Emptor
Caviar Emptor's picture

OPEC fail #1.

As I been sayin', they're bluffing. They don't have the production muscle power they used to

Tue, 02/22/2011 - 10:02 | Link to Comment ColonelCooper
ColonelCooper's picture

++++

Tue, 02/22/2011 - 10:04 | Link to Comment Rusty Shorts
Rusty Shorts's picture

 - ah come on, oil is "abiotic", oil is continuously re-filling these underground lakes.

Tue, 02/22/2011 - 10:10 | Link to Comment ColonelCooper
ColonelCooper's picture

Sorry, I forgot.

Tue, 02/22/2011 - 10:18 | Link to Comment tonyw
tonyw's picture

can't you make it refill a bit faster?

Tue, 02/22/2011 - 17:36 | Link to Comment naughtius maximus
naughtius maximus's picture

Yes thank goodness for the magic oil fairys. Without them we'd have to adjust our consumption habbits!

Tue, 02/22/2011 - 10:00 | Link to Comment stoneman sacked
stoneman sacked's picture

A PhD in the Fed Reserve had once written a paper saying higher oil prices will kickstart economic growth. I wonder where is he now?

Tue, 02/22/2011 - 10:24 | Link to Comment LongSoupLine
LongSoupLine's picture

right now?  oh, he's in charge of ink refill at fiat printer #673.

Tue, 02/22/2011 - 11:30 | Link to Comment DaveyJones
DaveyJones's picture

getting kicked

Tue, 02/22/2011 - 10:02 | Link to Comment Careless Whisper
Careless Whisper's picture

+1 barrel of light sweet crude

Tue, 02/22/2011 - 10:02 | Link to Comment John Law Lives
John Law Lives's picture

The Saudis have done a good job keeping the world guessing how much oil they really have in reserves.  The ultimate "black swan" event may just be the day those greedy SOBs admit their reserves are much lower than the world was led to believe.

Tue, 02/22/2011 - 10:07 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Two BIG Lies.

The Saudis have nearly unlimited oil reserves.

Ben Bernanke doesn't "print money", he just buys assets.

Tue, 02/22/2011 - 10:28 | Link to Comment John Law Lives
John Law Lives's picture

Bernanke is getting mighty defensive about his monetary policies these days.  I wonder how he will attempt to justify QE3.

Tue, 02/22/2011 - 10:35 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

The sky is falling, the sky is falling. We need more power Scotty.

Works every time.

It really isn't hard to tell people what they want to hear. Just be careful about the eventual blow-back.

Tue, 02/22/2011 - 11:05 | Link to Comment John Law Lives
John Law Lives's picture

Sadly, it has worked.  However, soaring commodity prices around the world without soaring GDP growth is not favorable to the Fed's case.  I do not accept that we will have QE to infinity unless The Machine really is determined to destroy the world financial system and hit the reset button.

Tue, 02/22/2011 - 11:31 | Link to Comment DaveyJones
DaveyJones's picture

He is a chicken and his honesty is little

Tue, 02/22/2011 - 10:57 | Link to Comment Idiot Savant
Idiot Savant's picture

When they turn off the QE spigot, the DOW/S&P will tank so fast everyone will beg for QE3.

No need for justification when junkies are begging for it.

Tue, 02/22/2011 - 11:01 | Link to Comment John Law Lives
John Law Lives's picture

<<<   everyone will beg for QE3. >>>

When you say "everyone", I assume you mean everyone that matters to the Fed.  I, for one, do not care if the DOW/S&P tank because I have no exposure to it at the moment.  I also don't matter to the Fed.

Tue, 02/22/2011 - 10:01 | Link to Comment Thorny Xi
Thorny Xi's picture

Agree with Flakmeister - Saudi production peaks out around 9.7mm bpd now, their 12.5 figure is total vapor.  If Libya goes offline the world will have to give up the fantasy of Saudi salvation

Tue, 02/22/2011 - 11:33 | Link to Comment DaveyJones
DaveyJones's picture

yup. Why else would the saudis be drilling out on platforms? Much lower return 

Tue, 02/22/2011 - 12:31 | Link to Comment FrankIvy
FrankIvy's picture

There have been several 'tells' over the last few years.  Drilling on platforms is a huge tell.  It would be like an apple picker picking all the apples on the very top of the tree before grabbing the ones reachable from the ground makes no sense.

Another critical tell was during the 04 to 08 price run up.  If you review Saudi production during that run up, their production was flat.  Price went from 40ish to 145ish and they didn't pump any extra.  Big tell. 

Another tell happened right when price came rapidly off of 145 a barrel (down to the remarkable price of 30ish!).  Their production fell rapidly too.  The tell there is that they were pumping flat out, panicky, and they desperately wanted to ratchet down production, which they did immediately upon price decline.  Had they lowered production during the run up to 145, obviously, it would have set off WWIII.

Tue, 02/22/2011 - 12:15 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Flakdood and I tend to type the same characters on this stuff.

In this case I'm gonna go in one extra layer.

I don't know their capacity, but there is a factor here worth mentioning.  Maybe they have 12 mbpd of production ability -- and if they do it they destroy the field.

You can destroy fields with excessive extraction rate.  The phenomenom involves water coning.  I do not have the details of Ghawar's geology at my finger tips, but they have been godawful pumping brine down there for decades.  If you pull too hard, the water moves up in the rock and it becomes more or less impossible to get the remaining oil.

Point being, for technical petrogeology reasons, you do not only extend lifetime of fields with lower extraction rates.  You also increase the amount of extractable oil.

If that's going on, we don't have much time left before wars will be necessary to destroy one country's consumption in the interests of another's economic growth. 

Tue, 02/22/2011 - 12:19 | Link to Comment Flakmeister
Flakmeister's picture

  Yes, there is that "side effect".  There is some evidence that Ghawar was damaged in the late '70s, witness that Ghawar has never exceeded the flow from that period. For the purposes of the Hedge, this is too subtle an argument...

I do have to give credit to the Saudi's, they have been very effective shepherds of their fields, but all lambs grow old and die.

Tue, 02/22/2011 - 12:28 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

 

Nod.  My overall point I think is that this is the answer that does not require a Saudi Aramco wide conspiracy.  Every one of them is telling the truth.  They CAN go to 12 mbpd any time they want, and if they do, it will die in less than a year and remain dead forever.

They all are telling the truth.  They just carefully do not go further than that initial truth, because no reporter could know enough to ask the question -- and if they did, the proper answer would be "our total reserves are a state secret, sorry".

I like answers that do not require conspiracies.  This configuration allows them to be honorable men while still explaining why they don't pump more at $107/barrel -- instead of outright giving the Russians 1.5 mbpd of customers and sales revenue, which they are doing now.

Tue, 02/22/2011 - 12:40 | Link to Comment Flakmeister
Flakmeister's picture

    It would have been interesting to see if the techniques used by the Saudi's, i.e. secondary recovery techniques from the get go had been used in the FSU. There were a lot of great oil fields that were abused in the past....Ever see photo's of Baku in its heyday?

Edit:  Forgot to add that the Saudis can spike "production" by drawing down their storage facilities. I think that is part of the equation. Some of that 12.5 mmbpd is also exisitng infrastructure on older fields that simply cannot be ramped up, e.g. Abqaiq

Tue, 02/22/2011 - 12:42 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Good point.

Tue, 02/22/2011 - 10:06 | Link to Comment Caviar Emptor
Caviar Emptor's picture

We should already be looking ahead to the day where OPEC will be disbanded, downsized or at the very least re-packaged. 

After revolutionary overthrows all over the Middle East, new governments won't uphold the same agreements as their dictatorial predecessors. 

Expect a giant re-negotiation to take place and lots of internal squabbling that could go on for years. OPEC was born out of the turmoil of the 1970s. It will die in the turmoil of the 2010s. 

Tue, 02/22/2011 - 10:11 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Petro Dollar death

Tue, 02/22/2011 - 10:11 | Link to Comment fragrantdingleberry
fragrantdingleberry's picture

"We don't need no stinking oil. We got unlimited wind and solar energy, bitchez."

-B. H. Obama

 

Tue, 02/22/2011 - 10:15 | Link to Comment TradingJoe
TradingJoe's picture

Not sure "OmBenji" will take it in stride!

I expect some sort of "actions" sides of the "gov"!

Tue, 02/22/2011 - 11:06 | Link to Comment MolotovCockhead
MolotovCockhead's picture

If the Arabs are not retarded, they will not pump up their oil all at once! Otherwise, what they gonna feed their people when the oil wells run dry, desert sand?

Tue, 02/22/2011 - 11:42 | Link to Comment johnQpublic
johnQpublic's picture

Ear-Bending Cellmate: ...and when there was no meat, we ate fowl and when there was no fowl, we ate crawdad and when there was no crawdad to be found, we ate sand.
H.I.: You ate what?
Ear-Bending Cellmate: We ate sand.
[pause]
H.I.: You ate SAND?
Ear-Bending Cellmate: That's right!

Tue, 02/22/2011 - 12:20 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

I added a comment above about extraction rates.  It's not only about extending lifetime of the field.  Too high an extraction rate can damage a field irreparably and not only shorten the lifetime but also reduce the total amount of oil that can be extracted.

Tue, 02/22/2011 - 12:36 | Link to Comment FrankIvy
FrankIvy's picture

Molotov wrote: 'If the Arabs are not retarded, they will not pump up their oil all at once! Otherwise, what they gonna feed their people when the oil wells run dry, desert sand?'

 

So your argument is that a government will act today in a manner that will require a sacrifice by the current population for the benefit of a future population? Ahahahahahahahahahhahahahahahahhah!

Tue, 02/22/2011 - 11:19 | Link to Comment Cpl Hicks
Cpl Hicks's picture

WTI @ 91.30....bfd, I say to no one in particular, not much shock or awe there.

Tue, 02/22/2011 - 12:18 | Link to Comment Printfaster
Printfaster's picture

The Saudis sold the  "easy button" to Staples for next month's caviar supplies.  The oil field easy button is gone, baby.

Tue, 02/22/2011 - 13:02 | Link to Comment topcallingtroll
topcallingtroll's picture

The saudi spare capacity is heavy sour crude. The types of refineries that can use that dont have enough excess capacity to make a difference anyway even if saudi had enough.spare production capacity. If this doesnt end soon our recovery is at risk.

Tue, 02/22/2011 - 21:39 | Link to Comment Nobody special
Nobody special's picture

The market is still hemorrhaging jobs, the books are cooked, food is inflating at an outrageous rate and oil is on the rise.  The only reason we don't have a total deflation is currency debasement.  Pray tell, of what recovery do you speak?

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