 | And how is Saudi Arabia getting on? (or more evidence of a deteriorating situation...) | The Oil Drum | Nature takes on peak oil (pun somewhat intended) |  |
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Very good question! in particular if you look at Saudi Arabia, is the recent drop demand related (not enough demand + high inventories) or a supply problem?
In order to answer you need side information about reserves, new projects, depletion, etc.. In case of KSA, we have only very partial information.
IMO, the only way to decide between a demand or a supply plateau, is:
1. High prices for a long period
2. Steady oil demand (no economic recession)
3. Lower inventories
4. Drilling frenzy
Regarding KSA projects, I note that the new Khursaniyah development (claimed 500,000 bpd Arab Light) has been brought forward by 6 months from Dec 2007 to June 2007.
On the face of it this seems odd considering the Saudis already supposedly have ample spare capacity and they've been voluntarily cutting back on production. However, the decision regarding this may have been taken at a time when the global demand/supply balance looked somewhat different, and there were concerns regarding supply disruption from Iran, hurricanes etc.
One to watch out for later this year.
Perhaps Khursaniyah provides better economics? - allowing the Saudis to rest tired reservoirs?
Good point, Euan. Mind you, if Simmons is right about Khursaniyah that doesn't say much for the rest of their fields :-)
IMO the litmus test will be falling production correlated with rising price
And I'm not convinced that oil prices are actually that high yet - oil is probably still cheaper than bottled water.