Saudis nix oil production increase: what next?

Oil prices surged nearly $3, reaching a record high of almost $128 a barrel Friday as Saudi Arabia rejected President Bush's call to increase production.

According to the White House, Saudia Arabia doesn't see enough demand to increase production.

President Bush met with Saudi Arabia's King Abdullah on Friday as part of his Middle East tour to appeal for greater production to help quell crippling fuel prices.

http://money.cnn.com/2008/05/16/markets/oil/index.htm?cnn=yes

How high can it rise?

 

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They are obviously lying. Production cannot increase. It will rise until using it is no longer economically feasible except as a luxury item.

 

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See our thread on peak oil. Bush got the same answer as at the last meeting when he accidentally acknowledged the fact that SA has been peaking:

"We can not ask for more where there isn't." (paraphrasing it)

SA used to have a 2-3 million barrels extra what they were able to use for descreasing price. Currently they are pretty much pumping with full power, and Ghawar is dying...

 

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Please Sir, Can I have Some More

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Pitiful!

What's the betting that Bush is forced to visit the leaders of oil producing nations and give head jobs and hand jobs to earn his next oil fix?

 

It depends on the degree of arousal ! Oh, you meant the price of oil.

Well it may not be noised abroad as yet but the Saudi Royals. insomnia and restlessness be upon them, are now conservationists. Well done Saudi, you are the envy of the world. Let those fat Yanks walk for a change !

 

The Saudis like to keep things secret. They release no data on oil production from individual oil fields; they merely like to offer one grand total number. As Syzygys said, their largest oil field (which happens to be the largest oil field on Earth) is beginning to run dry.

Here is visual representation on the importance of Ghawar to the overall Saudi oil production:

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Here is how the Ghawar looks like now (compare the original to the current):

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Let's get this straight. The American President goes to Israel and praises 60 years of democracy....then the next day, the same American President hugs the Saudi royal thug.

Americans are friggin hypocrites.

 

The spin has already started. After the news of "no increased production" there was another news saying that the Saudis increased by 300 K barrels per day. Except this increase started in May 10th and the Bush visit was 5 days later. So they are trying to spin it that the Saudis did something for the request of the US president...

http://www.bloomberg.com/apps/news?pid=20601087&sid=ax6FAhwJAl_w&refer=home

"May 16 (Bloomberg) -- Saudi Arabia, the world's largest oil exporter, will increase crude production next month in response to rising demand from its customers and a request by U.S. President George W. Bush to ease the strain of record prices.
The country will raise output by 300,000 barrels a day, or 3.3 percent, to 9.45 million barrels a day in June, Saudi Oil Minister Ali al-Naimi said in Riyadh today, following a meeting between Bush and Saudi Arabia's King Abdullah."

But:

"`On May 10 we increased our response to our customers by 300,000 barrels because they asked for it,'' al-Naimi said later. ``So our production for June will be 9.45 million barrels per day. This is the request of about 50 customers worldwide.''"

Sligthly contradictory and to me it looks like there is/was only one increase. Yeah, the Saudis realy would like to sell more oil for less....

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More follow up:

http://www.nytimes.com/2008/05/17/world/middleeast/17prexy.html?ref=middleeast

"Mr. Bush’s visit here was, in many respects, a reprise of a trip he made to the king’s ranch in January, when he asked for an increase in production and was rebuffed publicly by the oil minister and privately by the king. This time, the Saudis again resisted Mr. Bush, while offering at least the appearance of a concession.

The Saudi oil minister, Ali al-Naimi, told reporters that the kingdom had decided on May 10 to increase production, not in response to Mr. Bush but because customers, mostly in the United States, had asked for it. He said that over the last few months, as supplies from other countries had declined, the Saudis had filled in the gap."

 

Anyone interested in this subject should download the documentary 'A Crude Awakening' all about the history of oil production.

http://www.youtube.com/watch?v=Or-TyPACK-g

In 1985 OPEC decided that production quotas would henceforth be determined by reserves.

Sure enough, Kuwait was first off the mark to add 50% to its reserve estimates. Venezuela followed by doubling its estimates, and not long after the Saudis magically discovered massive increases.

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Heres a little screenshot from 'A Crude Awakening' showing the sharp spike in fossil fuel production on a grand time scale...5000 years before and after the present!!!

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The president of a country who whinged about communism and for decades while kissing the arse of the free market, goes to Saudi to beg the King to interfere with supply and demand pricing to bail his ailing capitalist economy out.

I'll think up a response when I get up off the floor from rolling around in laughter.

 

OPEC was founded to interfere with the free market concept.

Its a cartel...pure and simple.

 

Then so is the IMF and WB. Free market, my ass.

 

Mine too.

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In answer to thread's question: off shore oil and US, EU depression (Quickly following a "run on dollar" during six years beginning October this year.)

Saudi's land fields have probably peaked. They are increasingly drilling in the gulf water for oil. (Can’t hide that.) Brazil has been drilling for years off shore but finding mainly heavy oil that it sells to buy the lighter it needs. (Brazil is a net oil energy exporter, but net buyer.)

Recently, PertoBras has drilled deeper and found light oil, probably in huge amounts. "Tupi" was the first discovered megafield. All 15 exploratory wells of it hit oil. Full size is still unknown, but certainly larger than the US's Alaskan fields. Perhaps Tupi is third largest field ever found. Currently, just from these explorations wells, it can produce about 25,000 barrels / day. Next, discovered in last few months, came the Jupiter field and then the Carioca fields, where every well also found substantial light oil - at least 70 billion barrels is estimated in these two newer fields.

This oil will not be cheap as water above it is ~2,000 meters deep and it is then more than 6,000 meters below the sea bottom. The era of cheap oil is over. Look at the stock price of PetroBras. – It is rapidly rising. I sole mine a few days ago at the all time peak and it is up 5% more already. (You never know how far “momentum” will carry a stock. I think few realize how expensive this oil will be. For example, the rent on a drill ship capable of drilling here is more than $500,000/ per DAY and rapidly rising. One leased for several years recently at $650,000/day and PetroBras has 80% of all available under contract!)

These new fields may be all one, if so it will be the "largest field in the world." They are deep, under the same wide (at least 800 Km) layer of salt. This salt formed as Africa and South America separated. Land above sea level fell below and shallow ocean’s water evaporated in the hot sun forming a salt layer about 4000 meters thick. (Before it flooded, large amount of organic materials washed in from the higher lands on the East and West sides.) Probably the oil now being exploited in Nigeria was made in this same way. Note that the Brazil fields are where Brazil "fits" into the African continent at Nigeria.

US infrastructure is ill designed to cope with $250/ barrel oil and that is coming in less years than the US has time or money to build the public transport systems, Urban high rise apartments, good urban schools, etc. and convert the private car fleet to better than 50mpg gas or alcohol cars. It is clear what will happen. – Exactly what I have been predicting in posts for several years.

 

TransOcean of Texas seems to be the only company operating the deep water drilling ships in the Gulf of Mexico.

I was watching a film recently about how they keep the ship steady over the well using constant GPS monitoring. In water that deep they cant use anchors!

Hopefully for Brazil, the government will decide to keep all the oil in domestic reserve for future generations...instead of selling it all to foreign countries within 15 years.

 

I do not own any of them, but here are my notes:
" Transocean www.deepwater.com Have .pdf file of the slides from 1Q08 call.
http://www.forbes.com/markets/company_news.jhtml?ticker=RIG
The world’s largest offshore (and other areas) drilling contractor, with more than 50 years of experience and 21,100 employees is modern and versatile with emphasis on technically demanding segments of the offshore drilling business. Owns or operates a fleet of 138 mobile offshore drilling units (9 are Ultra-Deepwater, 30 are Deepwater and Harsh-Environment semisubmersibles and drill ships), 29 Midwater Floaters, 10 High-Specification Jackups, 56 Standard Jackups and 4 other assets utilized in the support of offshore drilling activities plus inland drilling barges. It stands to benefit the most from the tight deepwater market as it controls 7 of the 16 ultra deepwater rigs available to market through the end 2010. ..."

I alway buy in round lots and they are above $150/ sh now. Just today I bought 100sh more of DRYS. They just bought Ocean Rig, an offshore oil driller based in Norway which has two UDWs and DRYS has two coming -one building in China. - DRYS is the largest bulk carrier in the world, hauls a lot of the rion ore and soy from Brazil to China etc. DRYS will "spin off" a "PURE PLAY" in the UDW drilling field. RIG has a lot of jack ups which are not in short supply. In fact most have already left the Gulf of Mexico.* PemMex has, badly managed it gulf oil - spent the profits on social projects and let the capacity of their "golden goose" go to hell via neglect.
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*I think they are mainly going to the gulf for Saudi Arabia and Iran etc.