Wednesday, September 19, 2012

Latest Saudi Oil Production


Saudi oil production is in the news again:
The Group of Seven finance ministers last month called on oil exporters to expand production. Saudi Arabia initially reacted coolly to the request, saying that global supply and demand were balanced. But the kingdom has recently taken steps to bring down prices, consulting with large refiners and offering them extra oil.

“The current price is too high,” a senior Gulf-based oil official told the Financial Times. “We would like to see oil prices back to $100 a barrel.” The price of Brent, the global oil benchmark, has risen 33 per cent from mid-June to a peak of $117.95 a barrel on Friday. On Monday it plunged almost $4 in just four minutes, but later recovered.

Saudi Arabia last launched a similar round of consultations with major oil refiners in March, weeks before it boosted its production to a 30-year high of 10m barrels a day. Riyadh is now evaluating the response from refiners.

The nation last month produced 9.9m b/d, but the senior official said that Riyadh was now again pumping around 10m b/d. “We are consulting our clients about their oil needs and telling them we are ready to supply more,” the senior official said.
There's more at the FT article linked above, but I wanted to add the chart above for context (which shows all available data from publicly available sources through August).  The highest demonstrated production was in March and April of this year when they briefly touched 10mbd, before dropping very slightly in recent months.  Apparently the news now is that they will go back to 10mbd.

Interesting that production increases of 100-150kbd are news.  100kbd represents about 0.1% of global production.  If you accept a low figure for short term elasticity of -0.02, then that could, in theory, lead to a 5% decline in the price of oil.  However, it's significantly smaller than the normal month-to-month fluctuations in global oil production, so it's just as likely to be lost in the noise.

7 comments:

yvesT said...

Plus you consider this elasticity considering the demand is constent right ?

Kobayashi said...

Interesting to note that there seems to be a tightness on the market given the state of global economy.

Eric Hacker said...

I think this might be related to dropping Saudi consumption at the end of summer rather than to higher production. From today's Drumbeat is an article
Saudi crude burn hits new records in June, July

Eric Hacker said...

I think this might be related to dropping Saudi consumption at the end of summer rather than to higher production. From today's Drumbeat is an article
Saudi crude burn hits new records in June, July

Emil said...

Check this chart out:

http://crudeoilpeak.info/wp-content/uploads/2011/03/Saudi_Arabia_Crude_1980_2030_Husseini.jpg

It shows Sadad Al-Huseini's estimation of where Saudi Arabia can go.

It's important to note that he accepts the Saudi reserve estimate of 360 GB(instead of 260).

I think the truth is probably higher than 260 but not much higher. After all, the same Al-Huseini stated that global reserves are overestimated by over 300 GB, which includes perfect the 100 GB from Saudi Arabia as part of that sum.

Nonethless, it shows that Saudi won't get up much higher than 10.25 mb/d until after 2016.

So they are doing flat out as of this moment.

Saudi is maxed out. So is Russia.

The increase in production must now come from American tight oil, Brazilian offshore, Canadian tar sands as well as Iraqi conventional.

Three out of four of those areas have oil which have high decline rates and high production costs.


Iraq is the golden goose here, but we won't see more than double current production by 2020.

The question, as always, is if the rest of the world aside from these four can cover their own decline rates.

If they can, things will work out okay. If they can't, these additions will merely keep supply flat.

Neil said...

There is something on the transition website with a link to an article by Bloombergs saying by 2030 Saudi may be a net importer since they are using oil to generate electricity and demand is soaring.

http://www.theoillamp.co.uk/

"e Brutto" said...

Chatter on the web has it last US election season the Saudi's did the same nes pas