Wednesday, December 15, 2010

Update on Saudi Oil Production

While I'm updating my OPEC spreadsheet, it seems like a good idea to look at Saudi Arabian oil production.  This will be an interesting thing to watch in coming months.  The flow of US economic news has been turning a little more positive recently, and global oil production is increasing again.  In that environment, I would expect oil prices to increase (albeit probably fitfully), and then it becomes a very interesting question at what price Saudi Arabia will restore the production they cut at the onset of the great recession.

Looking at the graph above, three out of four data sources claim Saudi production has already started to increase (specifically, the IEA, OPEC, and the EIA, the latter particularly strongly so).  The increase only amounts to a few hundred kbd, and the Saudi's themselves (via their self reports to JODI), do not say they are increasing production.  Still, I'm inclined to wonder if the beginning of a slow trend to increasing Saudi production has begun.  The highest value of production Saudi Arabia has been able to demonstrate in recent years is 9.5mbd (based on the average index - black line - above).  They are about 1.3mbd below that today.

On the other hand, rig counts have continued to drift down through most of 2010, suggesting that Saudi Aramco doesn't currently anticipate their capacity coming under pressure:

Unless you think that little uptick in November is the start of something bigger.


Benno said...

Not to be greedy but was wondering if you had that cool graph handy of oil price v. Saudi production?

That may be the best we got as far as a peek into their minds.

Benno said...

Ron Patterson at the Oil Drum has posted this link with a quote from the former cornucopian, Michael Lynch.

The data suggests that over time, the output per well will continue to decline and at some point will be so low as to be uneconomical. As another point of interest, in the year 2000, the average output from a Saudi Arabian oilwell was 5,125 bbl/day. In 2009, the average was down to 2,817 bbl//day.

This analysis is merely a presentation of what can be determined by a review of statistical data over long periods of time. Putting aside the question of "peak oil", it is obvious that there is "peak economic oil" and the world is clearly moving in that direction.

What statistics can tell us about future world crude oil production rates

KLR said...

That's a different Michael Lynch: Mr. Michael Lynch - Consultant - Michael E. Lynch - GLG Council Partner. "E" for,, "C" for "Cornucopian." Heh, that was easy.

MikeE is well worth following - an insider with plenty of interesting insights.

Benno said...

Thanks KLR for the correction. I browse the Drumbeat comments very rapidly just looking for interesting links. Even though it was plainly marked by the commenter, I missed it. Very embarrassing.

Kenneth D. Worth said...

With all those rigs going for over a year, they couldn't get production above 9.5 mbpd. I'd be surprised if they ever get over 9 again. But call me a pessimist.