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Saudi Arabian oil minister says kingdom ready to boost output

The kingdom’s oil minister insisted this week that oil markets are amply supplied and that it stands ready to boost output. Its council of ministers asserted that excessively high petroleum prices threaten the global economy and that a downturn would lead to an abrupt pullback in prices, hurting the interests of oil exporters and consumers.

Last week, the transport arm of state-owned Saudi Aramco booked at least nine supertankers — far more than usual — for shipments to the United States, according to traders and Lloyd’s List. Each tanker can carry 2 million barrels of oil.

And the Saudi oil minister, Ali al-Naimi, told reporters in Doha, Qatar, on Tuesday that the kingdom was producing 9.9 million barrels a day, about three-quarters of which is exported.

...

“What the Saudis are trying to do is to change the psychology of the market and demonstrate that the market is well supplied,” said Robin West, chairman of PFC Energy, a consulting firm.

...

Naimi said that Saudi Arabia could boost output to 12.5 million barrels a day to meet demand but that customers are not interested in buying more than they are now.

“We ask the customers, ‘Do you need more?’ And invariably the answer is, ‘No, thank you,’ ” he said, according to Reuters.

One major oil trader, who requested anonymity to protect business relationships, said that if Saudi Arabia really wanted to tamp down prices it could lower its asking prices and then customers might buy more.
http://www.washingtonpost.com/business/economy/saudi-arabian-oil-minister-says-kingdom-ready-to-boost-output/2012/03/21/gIQAW0DfSS_story.html

Hm. So what's the news here. They've booked 9 supertankers for passage to America, 2 million barrels each so that's 18 million barrels, articles says 9 supertankers are "far more than usual." They SAY they can boost to 12.5mpd. Sounds like all talk? "Trying to influence the psychology of the market," as the article says?

If they really can ramp up from 9.9mpd to 12.5mpd on a dime, then they should go ahead and do it just to prove to everyone they can -- that would give future statements more credibility.

I don't know. The whole thing sounds unscientific and mickey mouse. They book extra supertankers to do what exactly, run around empty and psych people out?

And: “We ask the customers, ‘Do you need more?’ And invariably the answer is, ‘No, thank you,’ ” he said, according to Reuters. WTH, this isn't mangoes being sold on the street corner -- I would expect these decisions to sound precise and sound like they KNOW what they're talking about, does the world need more oil or doesn't it they should know this is their business, this is like talking out both sides of the mouth there "we can do 12.5 mpd / we ask if they want more nobody wants more oil."

They should just ramp up production if they really can and put it out there, but then price would go down with the extra supply and I guess they like the high prices just fine -- yet in the same article they admit prices are too high and are going to cause another recession.

How do you know the Saudi's are lying?

Answer

their lips are moving

They've already pulled this same jest back during the Libyan conflict and never came through.

They could probably "burp" it out by resting a few wells and letting production dip for a few days then pump the lot for a few days, hit the magic number then decline back to normal levels of production.

Mission accomplished while actually producing no extra oil!

If the market is ample supplied then why is Brent Oil trading above $125?

Either they are lying or they don't think $125 is high.

Either way, result is not good for US economy.

Naimi said back in January that it would take 90 days to get the next 700mb/d of production online, that would be about the middle of next month. That would coincide with those 11 tankers loading up for a trip to Port Arthur.

The issue isn't whether then can get to 12.5mpd but how many months/years can they sustain it without any decrease?

From what I remember, in 2009, they gave a forecast of 15 mb/d by 2011.

Right now they (KSA) don't want to get in between the US and Iran and probably don't want nukes as nightlights so they'll do what it takes to keep the US happy - or at least supplied.

We here read a few studies about a supply "crunch" in 2012 and think we know something the people running the show don't, it makes me laugh. Obama signed off on selling 85 F-15s to KSA 2 months ago - the biggest sale since '90-something. I'd say its hardly a coincidence that there is a flotilla of tankers coming our way.


http://community.nasdaq.com/News/2012-0 ... yid=127012

Also
"
Saudi Arabia is deploying the most oil rigs in four years as it prepares for possible shortages caused by tension with Iran, giving President Barack Obama one less reason to answer calls to curb prices by releasing supplies from America’s emergency reserves.
"
http://www.bloomberg.com/news/2012-02-2 ... rkets.html

Sixstrings wrote:

Saudi Arabian oil minister says kingdom ready to boost output

...

They should just ramp up production if they really can and put it out there, but then price would go down with the extra supply and I guess they like the high prices just fine -- yet in the same article they admit prices are too high and are going to cause another recession.

Six, make no mistake, they'll talk like they're our best buddies, but they're going to serve what they perceive to be in their OWN economic best interests. (Hard to blame them for that, BTW).

I think the reason for their inconsistent sounding talk is that what they do will depend on one thing -- how much can they get for their oil without the world tipping into recession and creating demand destruction. Plain and simple.

They may miscalculate -- and things they can't control like the Iranian situation are big ???'s in their calculations, of course.

I don't know why KSA calls market as ample supplied

If the market was ample supplied, Brent Oil would not be $125

Am I missing something here?

I mean the all time record is $147 and how is it that the market is ample supplied and the price is $125.

who are they fooling?

That part (well supplied) I think is just happy talk, they've been saying the same for quite a while. Maybe it is because their "spare capacity" is heavy oil that there is not sufficient refinery capacity to utilize?

Mostly I think it is because they calculate $100/bbl US is "what the market will bear" without going into recession. I think that is why they will try to spook the price back down to that level.

They are drilling ...


Early Warning


Interesting tho that when they "increase drilling" it means going from 25-50 rigs but in the US it means going from 600 to 1,200 rigs - oh that's right, we have that miracle in N Dakota that produces 80b/day per well.

Pops. You need to understand that the drilling that happens in SA is completely different than elsewhere.
They do not need as many rigs. The MRC wells they have been drilling since about 2006 require one rig to drill numerous multilateral completions.
As well much of what they are doing is work on existing wells which entails shutdown of production in laterals that are watering out and drilling of new laterals with expandable liners. The technology is pretty impressive and all achieved by Aramco. Basically a simple rig count doesn't tell you what is going on.
Based on what I have seen from the completion of the mega projects is that they should now be able to produce quite easily at the 12 MMBPD rate as long as there hasn't been a serious problem in anyone of the producing pools. My view on this is there are literally thousands of expats working in SA. If there was a huge issue someone would have leaked it by now.
Also it is a red herring that most of Saudi oil is heavy. It isn't by any stretch of imagination. There are two heavy oil projects one which is in full stream production and the other which has been postponed (Manifa). Most of the oil is quite light and the majority coming from the megaprojects was acutally superlight. The issue has been sulphur and althought the sulphur content isn't all that high in much of their oil it does require a refinery that can deal with it. The loss of Libyan oil demonstrated this inasmuch as the refineries who took that oil could not handle any sulphur at all. As a consequence trying to replace that lost production from Saudi Arabian spare capacity was just not going to happen.

I've said many times on this site (and many times in a thread that the mods decided to toss in the bin that had tons of actual real data on Saudi production) the Saudis learned very well from the last time they turned off the taps that market share is as important as price. They do not want competition to drive the prices down. They aren't stupid (I've sat in a presentation from one of the princes and I can tell you that he has his act together) and see the increasing liquids production in the US which is still a market they treasure. It's a bit of a dance on the edge of a blade ...too high prices and market share destruction....really high prices and demand destruction...too low prices and they can't pay for all of the programs in Saudi Arabia that keep the populace happy and less likely to start up a lynch mob.

Pops wrote:We here read a few studies about a supply "crunch" in 2012 and think we know something the people running the show don't, it makes me laugh. Obama signed off on selling 85 F-15s to KSA 2 months ago - the biggest sale since '90-something. I'd say its hardly a coincidence that there is a flotilla of tankers coming our way.

Don't want to derail into politics but just want to say.. that's a good thing, right? I guess Obama got us some more oil. I remember when Bush went over there, he came back empty handed.

Thanks for the info on MRC wells doc. I was kind of implying that while we need to drill lots of holes to get small result they actually have fields left where a well makes a difference.

About the heavy oil I was also thinking specifically about the story a couple of months ago about the Damam (sp?) field being reopened.

misterno wrote:I don't know why KSA calls market as ample supplied

If the market was ample supplied, Brent Oil would not be $125

Am I missing something here?

I mean the all time record is $147 and how is it that the market is ample supplied and the price is $125.

who are they fooling?

This is their euphemism for saying that the price is OK as far as they are concerned. The market is ample supplied with dollars, and as long as the dollar supply expands, expect the oil price to grow steadily.

Seems like if they privatize, we will know how much they can actually pump. [regardless what they might say, they have been maxed out for quite a few years]

Mystery: How much more oil can the Saudis really pump?

The OPEC leader is already pumping ferociously as part of a price war aimed at recapturing market share lost to the U.S. and others. Saudi's daily oil production has surged from 9.5 million barrels in early 2014 to a near-record 10.2 million today.

Saudi officials have stated the kingdom has the ability to ramp up output to an incredible 12.5 million barrels per day.

But Saudi Arabia's oil industry is shrouded in a great deal of secrecy, leading to persistent skepticism about whether those claims should be trusted.

Yeah. So whatever they do, they should ensure they sell all they can for as little as possible, since oil is the total lynch pin for their economy.

It looks like the inmates are running the asylum.