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Page added on October 18, 2014
Saudi, Kuwait Seen Curbing Oil Output at ‘Opportune Time’
Saudi Arabia and Kuwait halted production at a jointly run oil field late this week, a move that could help ease a supply glut that has pushed global prices down 25 percent.
The 300,000-barrel-a-day Khafji field, located in the neutral zone between the two countries, was being shut because of environmental concerns, a person familiar with Saudi Arabian oil policy said yesterday, who asked not to be identified because the information isn’t public.
The shutdown comes as Saudi Arabia and other OPEC members face increasing pressure to scale back production while supply expands from the U.S. and other countries and demand growth slows. Asia’s oil market has become particularly flooded as the U.S. imports fewer cargoes.
“This shutdown comes at an opportune time for Kuwait and Saudi Arabia given the current perception of an oversupplied market,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone yesterday. Cutting Khafji’s production is more advantageous for the countries because the oil generates less revenue for them than their light crude supplies, he said.
The countries’ Khafji Joint Operations venture started gradually curtailing output Oct. 16, an internal memo signed by company chairman Abdullah al-Helal and obtained by Bloomberg shows. The field will resume operations once it’s in compliance with emissions standards issued by the Saudi Presidency of Meteorology and Environment, according to the memo.
The state-owned Saudi Arabian Oil Co. and Kuwait Oil Co. didn’t immediately respond to e-mailed requests for comment sent after business hours.
Offshore Field
The joint venture runs the offshore area of a partitioned neutral zone between Saudi Arabia and Kuwait, a region that the U.S. government estimates to have a total capacity of 600,000 barrels a day.
Khafji crude has an API gravity of 28.5 and a 2.9 percent sulfur content, making it a medium, sour oil, the Energy Information Administration, the U.S. Energy Department’s statistical arm, said in a January 2013 report.
North Sea Brent crude, the global oil benchmark, settled at $86.16 a barrel yesterday on the London-based ICE Futures Europe exchange after slipping a day earlier to $82.60, the lowest level since November 2010.
Japan sold 300,000 kiloliters (1.9 million barrels) of Khafji crude from reserves that was scheduled to load July 20 to Sept. 30 from the Shibushi terminal in the Kagoshima prefecture, an official from the Ministry of Economy, Trade and Industry said June 23, while asking not to be identified citing internal policy.
More Supply
Production in the U.S. expanded to a 29-year high at 8.95 million barrels a day. Libya’s output grew to 780,000 barrels a day in September from 215,000 in April, increasing the supply of light crude competing for a buyer. The International Energy Agency said Oct. 14 that global demand would grow this year at the slowest pace since 2009.
Saudi Arabia increased output by 50,000 barrels a day to 9.65 million in September, 31 percent of the total from the Organization of Petroleum Exporting Countries, according to a Bloomberg survey. Kuwait pumped 2.94 million barrels, the third-biggest producer in the group.
“At the end of the day, it’s up to the Saudis,” David Hackett, president of energy consulting firm Stillwater Associates in Irvine, California, said by phone yesterday. “They’re the ones who have their hands on the valves, and it sounds like they might be closing the valve a bit.”
23 Comments on "Saudi, Kuwait Seen Curbing Oil Output at ‘Opportune Time’"
Makati1 on Sat, 18th Oct 2014 7:59 am
More Propaganda BS from the MSM…
rockman on Sat, 18th Oct 2014 8:27 am
Some perspective: adjusted for inflation, at current “low oil prices” OPEC will receive more annual revenue then they did for a 25 year period from 1980 to 2005. The last 6 years or so oil prices have been the anomaly. And $80/bbl oil is still anomalously high.
Kenz300 on Sat, 18th Oct 2014 8:39 am
Any relief from high oil prices will only be temporary.
Cheaper oil will help the world economy get back on track and help heal the damage of the great recession.
Demand is still rising in India and China…. so any relief will be short lived. Enjoy it while you can.
Use it as a time to diversify away from oil and end the oil monopoly on transportation fuels.
Instead of rushing out to buy an SUV get a bicycle instead. It has no monthly fuel cost and is better for the environment.
Plantagenet on Sat, 18th Oct 2014 8:47 am
KSA and Kuwait will have to cut more than that to get oil prices going up again
Nony on Sat, 18th Oct 2014 9:25 am
WTI had come up to 83 yesterday, but back down to 82 now. I don’t know if the field shut-in was anticipated or if it doesn’t move the needle. I think everyone is waiting to see if more cutbacks occur after the NOV OPEC meeting.
paulo1 on Sat, 18th Oct 2014 10:35 am
There could be a whole lot less travel if this ebola scare ramps up to a full blown crisis. Sure, air travel will tank, but what about mall sales and crowded markets? I think this is the economic trigger.
If there were just 100 cases in the US, or in any western country, do you think they would transport these patients around in private ambulance jets and have dedicated departments tending 1 or 2 patients? I don’t think so.
With a 50-60% mortality rate everything will grind to a halt including oil price rises and the oil industry almost everywhere. Then look for an unstable ME when the hush money dries up. We’ll know in a few months, in all likihood.
Volatile stock exchanges? We’ll remember those days with fondness and chuckles.
Paulo
Northwest Resident on Sat, 18th Oct 2014 10:53 am
The drop in oil prices gives TPTB an excuse to phase out fracking, the environmentally unsafe field mentioned in this article, tar sands in Alberta and all the other extremely high-cost, high environmental impact oil operations.
Maybe someone somewhere finally got the memo that earth’s environment is critical for human life and that all this unconventional desperate last-chance oil extraction is not only destroying our biosphere, but threatening human existence on this planet too. Maybe?
Boat on Sat, 18th Oct 2014 11:06 am
No memo on climate change. Folks will use the cheapest energy no matter what it is. Bring on methane gas.
Nony on Sat, 18th Oct 2014 12:37 pm
I always said that price could be the thing to kill the shale boom.
It’s not “running out of desirable drilling locations”. Efficiency/rig is climbing. Either the completion is getting better or they are moving into better rock or learning how to figure out where the better rock is. Or all of the above.
And it wasn’t a smoke and mirrors finance thing. holes that pay for themselves in 1-2 years are attractive. All that money, man and machines deployed into the shale for sound reasons.
At 110, there’s no doubt that they drill the shit out of [technical geology term] the Bakken, Eagle Ford, and Permian. Keep world price at 110 and Bakken will peak at 2 MM bpd, EF at 2.5, and Permian 3. And the snips, snails and puppydog tails (Niobrara, etc.) for another 2 MM. I don’t buy the
80 is a whole ‘nother ball of wax. We saw the shale boom turn off in 2008 hard when prices dropped to 40. Rock, what do you see happening with drill rig prices for onshore hz top-end machines?
Northwest Resident on Sat, 18th Oct 2014 1:59 pm
“And it wasn’t a smoke and mirrors finance thing. holes that pay for themselves in 1-2 years are attractive. All that money, man and machines deployed into the shale for sound reasons.”
Gotta hand it to you Nony. When it comes to fracking, you never give up.
But there is a wealth of information available to counter your best-case scenario statement quoted above. Just do a search and pick one, for example, as printed by one of your favorite references — that liberal and tree-hugging rag called “Forbes”:
Industry Insiders Call Shale Gas a Ponzi Scheme, Invoke Enron — NYT Report
In a damning investigative report “published this weekend, New York Times reporter Ian Urbina reveals that, in emails amongst themselves, energy executives, industry lawyers, state geologists and market analysts question the economics of shale gas and hint at impropriety. They call company statements about the value of finds a Ponzi scheme, invoke Enron, and cite a mentality of conning Wall Street while drilling fast, BEFORE THE JIG IS UP (my note: which is is, now). These comments area a stark contrast to the party line industry has been reciting to the press.
The e-mails — 487 of them, posted online so we can read them for ourselves — were obtained through open-records requests or provided to the Times by industry people who “believe that the public perception of shale gas does not match reality.”
Here are some chilling excerpts:
•“The word in the world of independents is that the shale plays [jargon for formations] are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.
•“And now these corporate giants are having an Enron moment,” a retired geologist from a major oil and gas company wrote in a February e-mail about other companies invested in shale gas. “They want to bend light to hide the truth.” [References to Enron are numerous in the emails.]
•“Money is pouring in” from investors even though shale gas is “INHERENTLY UNPROFITABLE,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”
…
The insiders, many with decades in the oil and gas industry, say shale gas is overhyped for a couple of reasons. The gas is not as easy to extract as boosters have been claiming, meaning it’s not as cheap as they’ve been claiming either. And wells are depleting more quickly than expected. This was confirmed not just by email comments but via production data provided by companies to state regulators and reviewed by the Times.
Many of the email correspondents wonder if the industry is purposefully – even illegally – lying about the value of the finds. Particularly striking, the chief executive of Chesapeake Energy [the company that had the gas well blowout in Pennsylvania in April], Aubrey McClendon told investors in 2008 that producing gas was only half its business model. The other half was reselling leases to other gas companies. The Times comments, “It is noteworthy because it shows how shale gas companies may be able to MAKE MONEY ON THE HYPE surrounding shale gas even if the price of natural gas remains low and even if wells under-perform.”
Several insiders bemoaned why the SEC wasn’t investigating the veracity of industry’s sunny claims. “The herd mentality into the shale will eventually end, possibly like the sub prime mortgage did,” wrote an official at Anglo-European Energy, an oil and gas company.
An official at Russell Energy Advisors, a company that counsels clients on energy investments, MOCKED the breathless media coverage for the natural gas boom, specifically calling out Daniel Yergin — who won a Pulitzer Prize for his oil industry tome The Prize: The Epic Quest for Oil, Money, & Power — for his “’lollypops and roses’ fairy tale” in the Wall Street Journal in November that year.
ht tp://www.forbes.com/sites/ericagies/2011/06/27/industry-insiders-call-shale-gas-a-ponzi-scheme-invoke-enron-nyt-report/
bobinget on Sat, 18th Oct 2014 2:07 pm
The first article in a North American publication that mentions the words “Peak Oil” were in 1927.
What we are witness to is a subtile shift from one use to another. Gasoline to diesel, hi bred, natty gas, electricity. Coal to NG. NG to plastics and fertilizer.
Power generation from coal to renewables. NG, solar as fuel stock of hydrogen for fuel cells.
During this transition we humans will waste lives and oil coveting the limited resource.
nemteck on Sat, 18th Oct 2014 2:40 pm
“And $80/bbl oil is still anomalously high.” No, it is not. One cannot compare present oil prices with historic ones since the low hanging fruit have been harvested. Haven’t we read recently that Iran needs $140/b to break even, SA needs $93, and Bakken $80? So, prices are not anomalies, they are necessary.
Perk Earl on Sat, 18th Oct 2014 2:43 pm
MSM seems to want to have it both ways. On one hand they claim SA is not reducing production to maintain market share & lower prices because they want to nix LTO & bitumen, BUT on the other hand the claim is they are shutting in an oil field to lower output to raise the price of oil.
Since those two strategies are in conflict, which one is it?
rockman on Sat, 18th Oct 2014 3:24 pm
“still anomalously high.” No, it is not. One cannot compare present oil prices with historic ones since the low hanging fruit have been harvested.
Of course it is. Apparently you don’t understand the meaning of anomaly. And I hate to break it to you, bubba, but there has never been “low hanging fruit”. I started hunting oil/NG 40 years ago and it wasn’t any easier then now. In fact in some aspect, exploration today is easier. The success rate for conventional reservoirs has never been as high as it is today. The problem is the lack of viable prospects regardless of how high oil prices climb. The old heritage fields were very difficult to find and thus lots of dry holes. THE BIG DIFFERENCE is that many of those fields were very large. Excluding the Deep Water plays modern conventional field discoveries (even with their higher success rate) tend to be much smaller.
Trust me: I started running economic analysis of drilling projects in the 70’s and there were very few that could be justified until prices jumped several years later. In the early 60’s there were huge layoffs in the oil patch: there was no “low hanging fruit” over half a century ago. A lot of geologists had to resort to selling shoes at Thom Mcan to make a living. Old joke I won’t explain right now.
I seldom react to the “low hanging fruit” comments and just ignore the misconception. But it’s a slow news day and legs hurt like hell so I’m in a feisty mood. LOL._
GregT on Sat, 18th Oct 2014 4:00 pm
“KSA and Kuwait will have to cut more than that to get oil prices going up again”
Wrong again. Oil prices will go up regardless of what KSA and Kuwait do. As usual, your simplistic view of the world is completely unrealistic.
meld on Sat, 18th Oct 2014 5:08 pm
fracky go boom pop bye bye
Perk Earl on Sat, 18th Oct 2014 6:53 pm
That was good, Meld. Now do the collapse – LOL.
Makati1 on Sat, 18th Oct 2014 8:53 pm
The addicted will pay any price, even to the point of murder (Iraq, Afghanistan, Africa, etc.) or self destruction, (Western economies) to get that next ‘fix’ of whatever. Much of the world is addicted to oil energy at a level I would compare to heroin or cocaine.
The pains of withdrawal are starting to double-over the addicts. (Collapsing economies) As in other serious addictions, this will NOT end well. Are you prepared?
Rick on Sat, 18th Oct 2014 8:58 pm
@meld….LOL…when wells in the Permian are doing over 100,000 barrels in 6 months I don’t think you will hear any popping noise anytime soon!…lol
Plantagenet on Sat, 18th Oct 2014 9:40 pm
@Greg T
Oil prices are down about 20% over the last couple of months.
Get it now?
Makati1 on Sun, 19th Oct 2014 12:23 am
Plant, if oil prices are still ~$80 in the Spring, THEN it may prove something. It could be back at $110 by the end of the year, or sooner, and probably will be.
Plantagenet on Sun, 19th Oct 2014 1:31 am
If you really believe that oil will be back at $110 by the end of the year, then buy some oil futures contracts and put your money where your mouth is…..
No? Won’t do it? Whats that—you don’t REALLY know where oil will be by the end of the year?
The facts are clear—-the price of oil has collapsed to down around $20 bbl.
Thats the current price. CHEERS!
Makati1 on Sun, 19th Oct 2014 8:58 pm
Plant, I don’t gamble in obvious rigged games.
Are you really as stupid as your remarks indicate or are you some mental deviate that wants to be put down. A masochist? (noun 1. Psychiatry. a person who has masochism, the condition in which sexual or other gratification depends on one’s suffering physical pain or humiliation.)
Or, are you a government plant or a bot of some other organization/corporation?
If not, then you should be. You are more like a computer program that is used to repeat the same stupid shit over and over again with no real thought behind it.
Perhaps you are not even out of grade school yet? Does this site have an age minimum?
It takes a lot to get my ‘putdown’ gears working, but you finally managed it. Nice work! Now back to the REAL world most of us live in.