AuthorTopic: 🛢️ Oil Resource Wars  (Read 1945 times)

Offline BuddyJ

  • Bussing Staff
  • **
  • Posts: 35
    • View Profile
Re: 🛢️ Oil Resource Wars
« Reply #30 on: September 21, 2019, 05:29:26 PM »
My vote is for Don The DimWitted to keep kwetching and trumpeting how tough sanctions are because he doesn't want to get involved in more Middle East shenanigans.

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 38901
    • View Profile
🛢️ Why The Saudis Are Lying About Their Oil Production
« Reply #31 on: September 25, 2019, 01:30:51 AM »
https://oilprice.com/Energy/Crude-Oil/Why-The-Saudis-Are-Lying-About-Their-Oil-Production.html

Why The Saudis Are Lying About Their Oil Production
By Simon Watkins - Sep 23, 2019, 6:00 PM CDT


Saudi Arabia’s comments about its hydrocarbons industry have long been regarded by industry experts as being as believable as China’s comments about its economic growth: that is, not at all. Saudi Arabia’s skill in lying is definitely improving, though, from the outright transparent lies about its level of oil reserves, spare capacity, and why the omni-toxic Aramco should nonetheless be valued at US$2 trillion.

Its latest lies - along the lines of ‘everything is fine after the attacks and we will be back to full production really quickly’ – are relatively nuanced. “The Saudi statements may not contain any direct falsehoods as such but nor are they entirely being fulsome with the truth,” Richard Mallinson, senior energy analyst for Energy Aspects, in London, told OilPrice.com last week.

The stage was set for the Saudis’ latest lying extravaganza with the aerial attacks on its massive Abqaiq oil processing facility and Khurais oil field launched, according to various sources, by Houthi ‘rebels’ in Yemen or by Iranian operatives in Yemen or in Iran. The effect of the combined attack on Abqaiq and Khurais caused the temporary suspension of 5.7 million barrels per day (bpd). This equates to well over half of Saudi Arabia’s actual crude oil production capacity, not the capacity figure that Saudi has plucked out of nowhere for geopolitical power purposes in recent years, and resulted in the biggest rise in oil prices in a single day ever.

Once the hedge funds, who had handily positioned themselves long some days before the attacks, had taken their profits, and younger traders remembered that the U.S. can release vast amounts of oil at the drop of a hat from its Strategic Petroleum Reserve to keep the price of oil – and, crucially ahead of an election year, the highly correlated and politically enormously sensitive gasoline pump price in the U.S. down – oil prices came down again, obviously.

A number of interesting things happened from the Saudi Arabian side as the prices went up and then went back down again. The first of these, as OilPrice.com was informed repeatedly by senior oil traders throughout the day, was the lack of real understanding that senior Saudi officials seem to have on how the oil market works or any details of Saudi’s own oil industry.

“I used to think the Saudis thought all of us [oil traders] were idiots, with all the rubbish they used to come out with and thought we’d believe, but recently it’s occurred to me that they genuinely don’t know anything about the oil industry, so they don’t understand that other people actually do know what they’re talking about and this has also been one of the reasons for the constant delaying of the Aramco sale, by the way,” one senior oil trader based in Asia told OilPrice.com.
Related: Millennials Really Do Ruin Everything, And Big Oil Is Next

The Aramco sale to one side for another time (although OilPrice.com has exclusively previously highlighted all of the lies pertaining to it), one particularly striking comment came from Saudi Arabia’s new oil minister, Prince Abdulaziz bin Salman, just after the attacks. He stated that the Kingdom plans to restore its production capacity to 11 million bpd by the end of September and recover its full capacity of 12 million bpd two months later.

“It was extremely telling that he spoke of ‘capacity’ and later of ‘supply to the market’, as these are terms that Saudi tends to use in order to avoid talking about actual production, as capacity and supply are not the same thing at all as actual production at the wellheads,” said Energy Aspects’ Mallinson. “What Saudi is trying to do by not revealing the true picture is to protect its reputation as a reliable oil supplier, especially to its target clientele in Asia, so we have to take all of these comments with a hefty pinch of salt,” he added.

So hefty a pinch of salt as to be mountainous in the case of its capacity and corollary spare capacity figures. The country has stated for decades that it has a spare capacity of between 2.0-2.5 million bpd, implying – given actual production during virtually all of this time averaging less than 10 million bpd - total production capacity of 12.0-12.5 million bpd. This level, though, or anywhere near it, has never been even remotely tested, with the highest production ever recorded being just over 11 million bpd in November last year.

This is despite the all-out oil price war that Saudi started in 2014 against U.S. shale producers to try to destroy the industry through low prices caused by flooding the markets with oil. “If the Saudis had anything near 12 million barrels per day capacity, that would have been the time to pump it but all it managed was just under 10 [million bpd] with 10.5 [million bpd] managed for just one month over that two-year period [2014-2016 before Saudi reversed it strategy],”

Additionally, the EIA defines spare capacity specifically as production that can be brought online within 30 days and sustained for at least 90 days, whilst even Saudi Arabia has said that it would need at least 90 days to move rigs to drill new wells and raise production to the mythical 12 million bpd or 12.5 million bpd level. Many serious oil market players now do not believe that the Saudis have anywhere near 2 million bpd of spare capacity, as it would imply production of 12 million bpd plus. Instead, many now believe that the Saudis have sustainable spare capacity of no more than around 0.5-1.0 million bpd.

Whatever Saudi’s actual capacity, there is absolutely no way that it can have made any accurate assessment of how long it would take to get back to any particular capacity level either – another lie. “Engineers we have spoken to have said that following an incident like this it would take several weeks just to assess the damage, never mind to begin doing anything about it, rather than the few days that the Saudis have taken and then announced the actual timeline – and a very short timeline at that – to bring back various stages of capacity,” said Energy Aspects’ Mallinson.

“Instead, what the Saudis will do to keep exports up is draw down supplies to its domestic industry and reduce the amounts it is sending to domestic refineries – one big refinery, SASREF, is conveniently bringing forward its planned maintenance for later in the year to now - and we hear very mixed reports which of the other refineries are operating at regular rates,” he added. “But some buyers are already being warned of delays, some are being offered swaps with other grades and so on,” he underlined.
Related: US Shale Kept Oil Prices From Surging After Attacks On Saudi Oil

Specifically, a number of customers of Saudi’s Arab Light and Arab Extra Light grades – the grades most affected by the recent attacks – have been offered Saudi’s Arab Medium or Arab Heavy as substitute grades.OilPrice.com understands from oil trading sources. This even applies to Saudi’s number one target country, China. A number of refineries have been told by Aramco that their rolling orders for Arab Extra Light crude cannot be supplied for the time being but can be switched for either Arab Medium or Arab Heavy, depending on the set-up of the refinery. Others, looking for their usual monthly supply of Arab Light have been told that this will be switched to Arab Heavy as a substitute for September loading at least.

The other measure that Saudi is taking - which it has vehemently denied but OilPrice.com can confirm from various oil trading sources and from sources in the Iraq Oil Ministry – is looking to buy Iraq oil grades, which are close to the key export grades that Saudi ships to various destinations, including Asia. “Aramco Trading Company has been aggressively checking prices and lot sizes for Iraqi crude with various [oil] trading houses since the attacks and are looking are shorter-term potentially rolling contracts,” one trading source told OilPrice.com last week.

“A number of the Iraqi grades are close in specifications to their Saudi counterparts, and part of this activity by Saudi to fill customer supply quotas for these grades is to make sure that the demand we are still seeing for such Iranian grades from Asia, but mainly China, is not boosted to make up for the shortfall from Saudi.,” a senior source who works closely with Iraq’s Oil Ministry told OilPrice.com.

The supreme irony, of course - as OilPrice.com has repeatedly underlined, and as many in the oil markets now know, although apparently not the Saudis - is that a cornerstone strategy used by Iran to circumvent current U.S. sanctions against it (as was also the case in the previous period of sanctions) is to rebrand its oil into Iraqi oil, which is extremely easily done, both at the massive and porous border between the two or via various pipeline and shipping routes.

It may well be, then, that Saudi Arabia ends up boosting the bank accounts of the very people that it thinks was behind the attacks on its own oil infrastructure, the Islamic Revolutionary Guards Corps – a staunch and active supporter of Yemen’s Houthis - through its various oil-industry associated businesses by buying Iranian oil, albeit with the stickers changed on the barrels.

By Simon Watkins for Oilprice.com
Save As Many As You Can

Offline BuddyJ

  • Bussing Staff
  • **
  • Posts: 35
    • View Profile
Re: 🛢️ Oil Resource Wars
« Reply #32 on: September 25, 2019, 04:02:49 AM »
Lying? Or just covering their bases to make sure that faith in the House of Sauds' ability to keep the black gold continues unshaken? The latter seems like a better characterization, and there are more than a few reasons why this can be happening that fall under CYA. By definition a cartel is all about market manipulation, and Saudi is about the only swing producer left within the cartel, so at this point they are the cartel.

My guess at this point is that stopping the next attack is more important than whatever they need to squeeze through the consequences of the last one.

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 38901
    • View Profile
https://oilprice.com/Energy/Oil-Prices/300-Oil-What-If-the-Attacks-In-Saudi-Arabia-Had-Destroyed-Production.html

$300 Oil: What If The Attacks In Saudi Arabia Had Destroyed Production?
By Irina Slav - Sep 30, 2019, 6:00 PM CDT


Saudi Arabia’s Crown Prince Mohammed bin Salman (MBC) has told CBS that oil could reach “unimaginably high numbers” if a war with Iran were to erupt, which he suggested could happen if “the world does not take a strong and firm action to deter Iran.”

And while MBS is known to engage in hyperbole when it comes to the threat Iran poses, recent events suggest he may have a point here. But what are these unimaginably high numbers he is suggesting? $100 per barrel? $300 per barrel? And what would the world look like if prices really went that high?

The recent drone attacks on Saudi Aramco’s oil facilities, which took 5.7 million bpd offline, have been largely attributed to Iran – even if the Houthis have claimed responsibility for them. This attack was evidence that Iran does have the means to strike at the heart of Saudi oil structure and, in an all-out war, it is reasonable to suggest a strike on those facilities could be far more devastating. In that scenario, those 5.7 million bpd could be taken offline permanently – leaving the global oil industry in a very precarious position.

While this may be a hypothetical scenario, it is one that the September 14th attacks proved were possible, and it is in the light of those attacks that MBS’ words can be fully understood. A destructive attack taking almost 6 million bpd in oil production offline – permanently - would certainly have a much deeper impact on oil prices than the actual attack on Saudi facilities did. Following that attack, Brent briefly topped $70 a barrel and then retreated quickly on assurances from Riyadh. Then the international benchmark rose sharply once again - albeit not as high - when reports emerged that repairs might actually take months rather than weeks. But in the end, the panic was short-lived, and as newer information came in regarding Saudi Arabia’s ability to quickly bring production back online, oil prices eased back down, almost like it didn’t happen at all.

Days after the attacks, some analysts were forecasting $100 Brent prices, but there were also more sober minds that said there was no reason for oil to rise so high given that some OPEC+ members could increase production and that U.S. shale would do the rest. But this reliance on U.S. shale and other OPEC members are perhaps a little optimistic in such a scenario.
Related: Don’t Expect Oil Prices To Go Much Higher This Year

Iran and the UAE are the two OPEC members with the highest potential spare capacity, but if Iran and the UAE were at war they would likely see their production drop even further. That means that nearly all of the 5.7 million bpd would have to be replaced by the US, something that even the most ardent shale supporter would struggle to believe.

The United States has increased production substantially in the last year, but that upwards momentum may not be sustainable. In its latest Short-Term Energy Outlook, the EIA has estimated that production has risen by 1.2 million bpd from 2018. But that growth has been tempered by recent poor results from some of the U.S. most promising shale basins.

The reality is, there is no single oil producer that could increase production by 6 million barrels per day, and that 6 million bpd is realistically a conservative estimate if a full-blown war were to occur.

If 6 million bpd or more were taken offline for any significant timeframe, which could be caused by anything from the very real possibility of a closing of the Strait of Hormuz to another attack on Saudi Aramco oil infrastructure, oil prices would indeed spike to ‘unimaginable levels’.

If it were unclear when production could resume, a mad scramble would ensue to see who could pick up the slack - not to keep prices down, but to see who could steal the market share. Countries would undoubtably do their best to ramp up production, but it would be insufficient. The global Strategic Petroleum Reserves would all be tapped to keep the market supplied, but that is very much a short term solution.

Major oil consumers such as China and India would be desperately searching for alternate suppliers. But more importantly, these major consuming countries would be crushed if oil prices soar beyond $100. It’s hard to tell how much oil China has in storage, and if they could cushion the blow, but they would use up whatever they did have rather quick.

India is already trying to beef up its oil in storage to brace for trouble in the Middle East, and it is working on building additional storage sites that will be ready next year. India’s goal is to eventually have 90-100 days of oil in storage, to sustain its 80% import rate.

Chinese data is more murky, but it is widely accepted that China has been beefing up its oil in storage, taking advantage of moderate oil prices.
Related: Big Oil Fights For Its Life

Japan and South Korea are also large importers, with Japan having sizable reserves somewhere near 300 million barrels.

Despite the release from various SPR’s, the long-term reality of oil markets would keep prices extremely elevated until new production came online, or until demand destruction took place.

But how high could oil prices really go? In the event of 6-month long disruption of 6 million bpd, $100 oil certainly seems possible, but what if the 20 million bpd Strait of Hormuz gets cut off for a number of days or even weeks? Or what if production capacity in several other Gulf nations gets disrupted? A supply crunch the size of 20 million bpd could potentially send oil to $300. But oil prices don’t have to go that high to seriously upend high consumption economies.

India has been quick to sound the alarm every time Brent has climbed higher than their pain threshold, which is lower than $80. This would inevitably lead to demand problems. We have seen this several times already: oil prices jump, demand slackens, oil prices fall, demand improves, and then the global economy keeps growing.

The largest buyers of crude oil in the world would have a hard time sustaining growth if oil is trading close to $100, let alone if oil trades at $200 or even $300 per barrel. And the time it would take for oil prices to come back down again would be painful.

In the light of this historical evidence, MBS’ thinly veiled warning about oil prices can largely be seen as sabre-rattling, but the prospect of ‘unimaginably” high prices is perhaps not as farfetched as some analysts would have you believe.

By Irina Slav for Oilprice.com
Save As Many As You Can

Offline RE

  • Administrator
  • Chief Cook & Bottlewasher
  • *****
  • Posts: 38901
    • View Profile
🛢️ Iran oil tanker: Explosion on ship near Saudi's Jeddah port city
« Reply #34 on: October 11, 2019, 03:08:47 AM »
<a href="http://www.youtube.com/v/431GpGq4tvc" target="_blank" class="new_win">http://www.youtube.com/v/431GpGq4tvc</a>
Save As Many As You Can

 

Related Topics

  Subject / Started by Replies Last post
0 Replies
311 Views
Last post September 22, 2018, 06:49:02 AM
by RE
0 Replies
335 Views
Last post June 08, 2019, 01:53:00 AM
by RE
2 Replies
764 Views
Last post September 10, 2019, 05:10:16 AM
by RE