Wednesday, January 17, 2007

Saudis increase oil production

Bloomberg.com: Canada
Saudi Statements

Prices fell in early trading after Saudi Arabia's Oil Minister, Ali al-Naimi, said his country has 3 million daily barrels of spare capacity and will push ahead with projects to expand output. Oil futures plunged yesterday after al-Naimi said he saw no need for an emergency OPEC meeting to consider further cuts in output.

"The Saudis are saying that they don't want to be the swing producer," said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. "The Saudis have made substantial cuts, unlike a lot of the other OPEC members. Oil in a $40 to $50 range suits the Saudis much better than oil at $70."


You may be asking what this means.

Think about it in this light:
Iran exports about 2.5 million barrels of oil daily.

Iran has threatened to cut off export oil production if The US attacks or does anything to "undermine" Iran.

Iran has, essentially, no other export.

The Iranians have a big economic problem and need to keep oil prices high to fill the gaps in their economy.

The Saudis worry about loosing their power in the Middle East to Iran and its radical Shiite mullahs and aren't exactly thrilled with the idea of a nuclear Iran.

43 comments:

Mr. Beamish the Instablepundit said...

The Sauds know what Hugo Whatever down in Venezuela will learn in time, once collectivized farming starves enough Venezuelans:

You can't eat oil.

As a recourse against supply shocks from cuts in Iranian-occupied Persian production, you are correct Warren, but don't discount the full enchilada. Russia's pinching off the pipeline to Western Europe during its current trade dispute with Belarus is creating a scramble for reliable suppliers, and the Sauds are stepping up to deliver.

And by the way, they want dollars, not euros.

nanc said...

brilliant, warren.

yes, crude is not very tasty - no matter how you cook it!

let iran keep their oil.

nanc said...

p.s. although i'm not all-entrusting to the saudi's...

Mr. Beamish the Instablepundit said...

Nanc,

You can trust the Sauds to want to trade their stockpile of oil for currencies everyone else wants to be paid in for their trade goods. Iran is killing the fantasy of the "petro-euro." Actually China did that years ago with its long-term purchase of US treasury bonds, but that's an economics lesson for another time.

Internally, the Sauds have another political schism on their hands - a growing anti-Wahabist / Salafist sentiment in the ranks of the royal family. One that might tip Saudi Arabia towards reforming away from its current quasi-police state society. Say goodbye to radical Muslims preaching jihad on the royal dime if this is the trend.

Iraq government proposed sharing in the bounty of Iraq's oil revenues with the Iraqi people will only add more fuel (pardon the pun) to the jealousy and envy Saudi-controlled Arabians feel towards the economically free. That indicator is also moving, slowly, in the right direction.

And on another note, erase the national boundaries (as Islamic political thought does) and you've got a puddle of Arab Shia next to a pool of Persian Shia surrounded by Arab, Turkish, and Central Asian Sunnis.

Guess who wins that fight?

Warren said...

Cuz said:

"You can't eat oil.

As a recourse against supply shocks from cuts in Iranian-occupied Persian production, you are correct Warren, but don't discount the full enchilada. Russia's pinching off the pipeline to Western Europe during its current trade dispute with Belarus is creating a scramble for reliable suppliers, and the Sauds are stepping up to deliver.

And by the way, they want dollars, not euros.
"

That's true cuz, but "you can't eat oil" goes for the Russians too. The Russians need cash also and at present, their economy is running on an oil boom. Putin can't afford civil unrest.

When the oil prices go down, it causes all those well laid plans of the oil exporting thugocracies to go south. Their plans of energy blackmail go up in flames, (so to speak), as they rush to sell that oil they were hoarding to keep the money flowing.

Although the Saudis aren't opposed to almost doubling their oil revenues by selling their oil at 70 a barrel, 40 isn't going to hurt them a bit.

Its a leverage thing.

I could be wrong. After all, if I was that smart I'd be rich!

Warren said...

Nanc, I trust the Saudis to fill their own pockets and do what's best for the Saudis.

Warren said...

Oil price heads towards us$50

"OIL prices slumped again this week after OPEC powerhouse Saudi Arabia reportedly said there was no need for further production cuts to prop up the market.

The comments, by Saudi Oil Minister Ali Naimi, added to growing sentiment that the Organisation of Petroleum Exporting Countries would not call a special meeting to discuss further production cutbacks. These would be aimed at stemming a slide of more than 13 per cent in prices this year.

"There is no need now [for further cuts] on the basis of what market conditions are," Dow Jones Newswires quoted Mr Naimi as saying after arriving in New Delhi for an international conference.

Light sweet crude for February delivery plummeted $US2.46 to $US50.53 a barrel on the New York Mercantile Exchange on Tuesday, closing at $US51.21.
"

nanc said...

all i know is right now, i'm hungry for citrus and avocados! the ONLY things i miss about californistan.

and to think i parked my suburban for a week in moratorium for the high prices of fuel! don't laugh - it's a forty gallon tank. i'm thinking about towing the baby car back soon.

heaaaaaayyyyyyyyyyyyy - it may have paid off. yeehaw!

Always On Watch Two said...

As I've always said, "It's [trends of various sorts in history] always about the money."

Christianity, of course, would be the exception to that rule.

Excellent post and comments! I'll have to come back later for a more thorough reading. Off to work now.

nanc said...

the saudis are running a little skeert:

http://www.telegraph.co.uk/news/
main.jhtmlxml=/news/2007/01/17/
wterror17.xml

nanc said...

oops! that link won't work, let's try this one:

http://www.telegraph.co.uk/news/main
.jhtml?
xml=/news/2007/01/17/wterror17.xml

Gayle said...

I went to the link and got the front page of the Telegraph, but couldn't find anything on this.

It's an interesting development, don't you think? The Saudi's aren't exactly thrilled at the prospect of a Nuclear Iran? Gee, I wonder how come... not! This is good news, and we need more of it.

Brooke said...

Very astute observation, Warren!

Too funny. Iran may screw themselves yet!

FLORIAN said...

Oil will bounce back up I think. All it will take is a little trouble from Iran, Syria, or Hezbollah. Hurricane season is right around the corner and our worthless politicians haven't done a damn thing about letting us drill in our own Gulf of Mexico (which is rumoured to have even more reserves than the entire sand trap of the ME). No new refineries. No push for alternative fuels....just apathy from the losers in DC. How much you wanna bet that if Iran gets into a tussel with Israel or us that China eventually gets involved?

The Merry Widow said...

Florian-They will! And others from the FE, 200,000,000 strong. And quantity has a quality of it's own, as we found out in Korea! Will we remember that lesson?
Good work, Warren!
Good morning, G*D bless and Maranatha!

tmw

Always On Watch Two said...

As Warren said,
The Saudis worry about loosing their power in the Middle East to Iran and its radical Shiite mullahs and aren't exactly thrilled with the idea of a nuclear Iran.

The Saudis, at this point, are concerned about maintaining the strength of the Sunni sect.

As the home of Mecca, Saudi will--once the House of Saud falls (And I believe that will happen, if only by dint of inbreeding)--become a battleground.

How long will Saudi's oil reserves last? I've heard estimates of 10-20 years from a British friend of mine who currently works for ARAMCO. Iran's reserves, on the other hand, will be available longer.

The West had better get the show on the road for viable alternative sources to Middle Eastern oil. I've heard about technology for extracting oil from shale rock. Isn't that being done right now in Canada?

American Crusader said...

Both Iran and Venezuela are facing financial difficulties with oil prices being anywhere near the $50 mark.
Both of them need to have oil at around $70 per barrel.

Steve Harkonnen said...

Iran's threat, of course, would also come with the closing of the straits of Hormuz, which will dick up everything.

Mr. Beamish the Instablepundit said...

Steve,

Iran CAN'T close the Straits of Hormuz. Every time they've tried they've gotten their asses handed to them (see US Navy ops during the Iraq-Iran War). We've presently got more naval assets in the Persian Gulf than we ever did during the Iraq-Iran War, with even more on the way. The Stennis carrier battle group will be joining the Eisenhower carrier battle group (already there) in the next few weeks. There are four (4) expeditionary battle groups in the Persian Gulf besides all of that carrier firepower already.

And "surge," the buzzword of the Summer Pulse 2004 naval war game exercises, sent seven (7!) carrier battle groups out to sea simultaneously, on a moment's notice.

Kicking ass. It's what we do.

Mr. Beamish the Instablepundit said...

(Which, BTW, is why I suspect Iran's about to be out of the nuclear "power" business)

nanc said...

it IS written, beamish.

Mr. Beamish the Instablepundit said...

And our bombers will be looking at explosions 3 miles below them and 2 miles over their targets wondering how much Iran spend on their ineffective Russian "anti-aircraft" missles with a 10,000 feet range.

Mr. Beamish the Instablepundit said...

What's really going to f with them is when Iranian air defenses along the Straits of Hormuz get taken out by Tomahawk cruise missiles flying in from the northeast.

Mr. Beamish the Instablepundit said...

(because Tomahawks are cool like that)

Mr. Beamish the Instablepundit said...

Always coming in the back door.

I imagine little Pasdaran twerps getting on the horn to Qom to ask why Tehran is shelling their positions, LOL!

And then, SIGINT identifies who picks up the phone in Qom, and he gets a Tomahawk too.

Fun with netcentric warfare...

Mr. Beamish the Instablepundit said...

Heck, we might even drop an instant message to the Pasdaran "from" Qom telling them to shell Tehran in retaliation!

Might as well give our hackers something to do.

nanc said...

my word, beamish - i do believe you're making yourself all...bothered...

it's alright, nancpop just about drives off the road everytime he sees a piece of caterpillar or komatsu or john deere heavy equipment...

you men and the things that excite you!

Mr. Beamish the Instablepundit said...

Sorry, Nanc. It's just that Iranian-occupied Persia has deserved a country-style ass whoopin' since 1979, and I wanna give it to them.

It's fun to count the ways!

Always On Watch Two said...

Mr. Beamish is having fun counting the ways. Hehehe.

Mr. Beamish the Instablepundit said...

War makes me giddy, AOW.

nanc said...

he's beside himself with giddyness - that's right, there's two of him!

Mr. Beamish the Instablepundit said...

Actually, there's 34 of us, but never more than three present at a specific time coordinate.

Elmer's Brother said...

Beamish is preparing to be Commander in Chief. Only having 3 present and the rest are probably safely tucked away under the White House or somethin'. Good thinking Mr. President.

Mr. Beamish the Instablepundit said...

Actually, it's a bit more complex than that, EB. I was (will be) President from 2009 - 2017, and when the pocket-sized time machine was introduced in 2037, I decided to go back and do it again (I'm a sucker for nostalgia). Of course, I changed (or may change) my mind in 2047 and came (or will come) back in time to stop myself from becoming President (see Farmer John) but still, there is the plan that someday I will travel back to August 2004 and start my blog, which may or may not happen.

beakerkin said...

The great Gas masked Patriot allready made my points about Venezuela and Uncle Hugo.

When Gas was breaking record prices I went into a long boring discussion about cyclical comodity prices and upper thresholds. The reality is the Saudis are way smarter than the Mullahs and the nutjob Chavez. Long term price rises would expedite the production of alternative sources of oil. At 75 dollars a barrel Oil Sand in Canada and oil shale in Colarado become profitable and the Saudis know it.

If the Israeli method of extracting oil shale is profitable at $20.00 it could be lights out n Caracas , Tehran and Mecca.

Nelson said...

Very interesting story. I'll link to it on my blog

Nelson Guirado

Asymmetric

www.nelsonguirado.com

nanc said...

are you hibernating again, warren?

we have the cold white stuff on the ground here, but not enough to say so, so i take it back!

stay warm and if you cannot stay warm, be cool...

Russet Shadows said...

Good point. The Saudis aren't really our friends, but they sometimes co-operate with us and that counts for a lot in the ME affairs; they at least understand how to kick Iran in the nuts.

Nanc -- what's this technical thing you were asking about on my blog? Email, please.

Jason_Pappas said...

Those devious Saudis are at it again. They hate us but they fear the Iranians.

Yes, the Saudis don’t want us to win in Iraq but they don’t want us to leave the door open for Iran either. They just want us to bleed. I hate the fact that in stopping Iran from getting nukes (and I hope that’s what we’ll do) we’ll be helping the Islamic thugs in Saudi Arabia. One wishes a plague on both their houses.

nanc said...

jason - it will always come down to a lesser of two evils in this world - let us have the good sense to continue choosing the lesser - that's the best we can hope for - being of the world.

russet - will do.

Always On Watch Two said...

I feel like hibernating. We have a coating of snow, with ice on top. Treacherous footing!

Hey, Warren. Are you okay?

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