DrumBeat: January 21, 2007

Deffeyes: Update, End of 2006

Happy New Year! It's time for an oil update. The groups that report 2006 oil production numbers explain that their estimates are subject to later revision. However, we need to know the implications right now. With that warning, away we go.

From April 2005 onward, crude oil prices have been above $50 per barrel. For several months during 2006, oil prices rose above $70. At those price levels, virtually all producers pumped every possible barrel. With that kind of cash flow, any well operator who suspected one morning that his Blakenship #7 well did not produce its usual share last night will have Halliburton out there in the afternoon trying to fix it.

Nobel laureates say sustainability needs more than science

"Science is not the problem," said Donald Glaser, a UC Berkeley physics professor who won the Nobel Prize in 1960. "We can certainly build fuel-efficient cars. (But) year after year, Congress has refused to improve the mileage requirements for automobiles. We have to get together as a democracy and get our government to make changes."


Behold the Rise of Energy-Based Fascism (Part II)

What lies in our future may well be a blend of conflicts between rising and declining energy superpowers and a state-protected nuclear renaissance.


Global warming: the final verdict

The impact will be catastrophic, forcing hundreds of millions of people to flee their devastated homelands, particularly in tropical, low-lying areas, while creating waves of immigrants whose movements will strain the economies of even the most affluent countries.


New Orleans of Future May Stay Half Its Old Size

The empty streets, deserted avenues and abandoned houses prompt a gnawing question, nearly 17 months after Hurricane Katrina: Is this what New Orleans has come to — a city half its old size?


Green concerns prompt Prince Charles to skip ski holiday


Europe's first climate sink inaugurated in Monaco

Prince Albert of Monaco inaugurated Europe's first so-called "climate sink," in a bid to help fight global warming.

The concept of carbon sinks is based on the natural ability of trees, other plants and the soil to soak up carbon dioxide and temporarily store the carbon in wood, roots, leaves and the soil, thus purifying the atmosphere by absorbing part of the carbon dioxide generated by human activity.


JV with Russia may be the answer to India's energy crisis

Collaboration with Russia in exploration of oil and gas might be the answer to India's energy crisis instead importing fossil fuel from there, a CII report said.


Sacrifices necessary with new energy plan

President Bush must have the courage to ask the public to make some sacrifices as part of a "bold" energy plan he has promised to present in his State of the Union address this week, a Carter-era adviser said Saturday.


Draft Law Keeps Central Control Over Oil in Iraq

After months of tense bargaining, a cabinet-level committee has produced a draft law governing Iraq’s vast oil fields that would distribute all revenues through the federal government and grant Baghdad wide powers in exploration, development and awarding major international contracts.


Shell issues first Technology Report

Royal Dutch Shell plc today issues its first Technology Report, an overview of 27 advanced technologies - some delivering benefits today and others that will shape the future of the energy industry.


NATO Urges Saudi Arabia to Join Cooperation Pact

NATO appealed to Saudi Arabia on Sunday to consider entering a cooperation agreement with the Western alliance, citing shared interest in stopping weapons proliferation in an apparent reference to Iran.


Vast Pipelines in Amazon Face Challenges Over Protecting Rights and Rivers

Rather than steamrolling the opponents and skeptics, however, as often happens in Brazil, the company chose to woo them. The two million residents of Amazonas State have been promised economic benefits that have contributed to the project’s $1.15 billion price, and scientists and environmentalists were consulted about how to minimize damage to the jungle that blankets the state, which is larger than Britain, France, Germany and Italy combined.


Filipino Workers Held Hostage in Nigeria

Kidnappers grabbed six Filipino workers off a merchant ship Saturday in the latest hostage-taking in Nigeria's restive southern oil-producing region, officials said.


India: Work begins on Tata car project despite villager protests

India's Tata Motors said it broke ground for a new car plant under tight security after months of bitter protests against the project by farmers in communist-ruled West Bengal state.

...Activists and landowners have protested against the project, saying the government acquired prime fertile land for the 220-million-dollar plant to build small cars for Tata, a leading Indian car and truck maker.


Beyond the green corporation: Moving away from platitudes to strategies that help world and bottom line


'Gas Opec' premature

Two of top European gas suppliers, Russia and Algeria, sought to calm fears among their consumers yesterday that they plan to set up an Opec-like group for the gas industry.


MENA region to invest $57b in power generation by 2013

British energy expert Neil Walker has said that the power and water infrastructure projects in the GCC countries have witnessed a boom, as these countries have demonstrated sufficient level of stability that developers are now willing to risk capital. MENA region will invest $57 billion over the next six years to install new generation capacity.


UK utility poised to take giant step in green power generation

The UK utility Scottish and Southern Energy (SSE) will develop a plan to build a 90sq.km wind farm on the Shetland Islands. The 200-turbine wind farm will generate about 600MW of power – enough to meet the needs of one fourth of Scottish homes.


Big Game? An Enron Survivor Hunts for Riches

In November, the relatively obscure Houston company that owns most of that refinery, the InterOil Corporation, made the kind of announcement investors crave: explorations near the refinery had uncorked a vast pool of natural gas potentially larger than the United States’ total residential consumption of the fossil fuel in 2005. The size of the discovery was so large, Phil E. Mulacek, InterOil’s chairman and chief executive, informed an analyst, that simply controlling its output “was sort of like trying to stop the Mississippi.”


A Substitute for Oil?

Bloodshed in the Middle East dominates the evening news, fuel costs continue to creep upwards, and whispers circulate about a doomsday from global warming. As America looks for solutions, the proponents of alternative energies are finally being taken seriously. Yet despite myriad ideas, only a few alternatives have made their way to consumers, usually with the help of controversial government subsidies. Foremost among these alternatives is ethanol, a fuel made from corn or other crops, which burns cleaner at a higher octane. Yet the mere mention of ethanol causes environmentalists to cringe. As it stands, the energy input is hardly worth the payoff, with some opponents actually claiming negative gains. Furthermore, even converting all of the corn in America to ethanol using existing technology would hardly make a dent in the national thirst for fuel. However, in an age of genetic modification, biotechnology in the fields could potentially engineer the ideal fuel crops.

A note on the "Bumpy Plateau".

I think we were all assuming the Bumpy Plateau we are now on would be flat, i.e. that it would have a slope of zero, but that doesn`t have to be the case. In fact, it looks like it has a negative slope (ie downwards). Take a look at this graph, (ignore the faint yellow trace for the moment), just look at the red lines:

This sequence of lower highs and lower lows indicates that for the moment we are in a "snake" or "band" of values, and it gives us something new to look out for, not just the next monthly number from the EIA.

But what about the yellow trace? I`m glad you asked. The yellow trace is a best fit 3rd order polynomial to the data. Ever since the EIA revised the figures and put May 2005 above Dec 2005, it looked like Deffeyes was mistaken, even though these two numbers are very close. But if you look at the top of the smoothed curve - its Dec 2005. As Leanan says: Deffeyes ain`t wrong yet!

Oh yes, I nearly forgot, what is the next thing to look out for?
The thing to look for is the next mini low, followed by the next mini high. This will give an indication of breaking out above or below this pattern. Any guesses?

Best Regards
TB

TB, thanks for the great post. I also chart using Excel and have gazed at the above chart many times. However I also look at groups of countries like OPEC, non-OPEC, and each individual country.

The upsurge in production was due to two factors, OPEC opening up their chokes in 2003 after having cut back in 2001 and 2002. They produced flat out until they choked back down this past November. And it is also due to Russia and the Caspian nations recovering from the collapse of the Soviet Union. Angola and Brazil added to that upsurge also.

OPEC has peaked but the Caspian, Angola and Brazil have not. Russia will likely peak in 2007 or 2008 at the latest. (Angola is now part of OPEC but that is another story.)

I think the plateau will continue through 2007 and part of the way through 2008. We will, I believe, be down slightly in 2007 but not near as drastic as your yellow line indicates. My guess is that we will end 2007 with production around 72.5 mb/d. But that is just a guess of course as none of us have crystal balls. But I will put my guess up against anyone's.

Any takers. It will be around February 1st, 2008 before we can settle the bet but I will gladly put my guess up against anyone on this list, provided they give a figure as precise as I do, to .1 million barrels per day. Now don't get me wrong, I expect to be off by as much as .5 mb/d in either direction but not more than that, not much more anyway.

One caveat, my guess is dependent upon OPEC holding its current quotas. If they are lifted by the middle of the year, then 73 mb/d would be my guess. All figures are C+C of course.

Ron Patterson

One more very important point. The data is not precise enough to say whether May, December or some other month was the exact peak. All we can really say is that we are on the plateau right now, or at least a plateau! The exact month is not really all that important since we will probably really never know when that exact month really was.

Ron Patterson

Thanks for the kind words.

The data is not precise enough to say whether May, December or some other month was the exact peak.

Agreed. The raw data is not precise, however, the smoothed data will show an exact peak. I for one, find it entertaining to see if it matches various predictions.

Regards
TB

Lower 48/World Comparison: http://static.flickr.com/45/145186317_215cd1247f_o.png

This graph, from our Lower 48/Texas article was basically in support of Deffeyes' prediction that 2006 was the most likely year for a crude + condensate decline, within the context of a predicted peak in the 2004 to 2008 time frame. Note that Khebab used BP's crude + condensate + NGL's, which is pretty closely matching the crude + condensate graph. (Khebab did the technical work, I am primarily responsible for the conclusions.)

The Lower 48 and the North Sea peaked and declined after crossing the 50% of Qt mark. In other words, based on Deffeyes' plot, the world in 2006, was at the same stage of depletion at which the Lower 48 and the North Sea started declining (all three are crude + condensate plots).

Assuming that Ghawar is declining 100% of the oil fields in the world which are, or were, producing one mbpd or more are now in decline or crashing. This is happening just we hit record levels of crude oil production. In the past, when super giant fields declined, there were always other super giant fields showing stable or rising production. So, the only question right now is whether 93% or 100% of current and former super giants are in decline. This is supposed to lead to higher crude oil production? (According the Oil & Gas Journal, Kashagan, which is not even producing yet, is the only new one mbpd and larger field on the horizon, and at best, it won't cross the one mbpd line until the 2020 time frame.)

What is particularly odd about the Super Giant debate is that the key characteristic of a peak is when all or almost all of a region's giant fields start declining.

After reflecting on yesterday's Chapter 150 of the "Yes we have peaked; no we haven't debate," I can only conclude that Peak Oil Denial and Cognitive Dissonance are almost insurmountable obstacles, even on a Peak Oil website, of all places.

Denial and Cognitive Dissonance are almost insurmountable obstacles

Yes, except I would leave out the "almost". That is why some of us have ceased commenting on some subjects. Closed minds cannot be changed.

"Closed minds cannot be changed."

From a Salada tea bag quote.

Some Minds Are Like Cement,
All Mixed Up and Permanently Set

I fear you are right.

But young minds are moldable.

The future belongs to the young.

If only Bushie Baby could stand up like John F. Kennedy tomorrow night and proclaim in a deep Bostonian accent:

"Before this decade is out, we will land renewable energy, and the need for it, onto the mindscape of every red blooded American. Yeahh-ess. I am declaring a new Apollo Project to put man on a sustainable energy trajectory. Ask not what Big Oil can do for you, Ask what you can do for Planet Gaia."

Re: Pemex predicts production drop

I am posting the entire text of this article. Again, David Shields is predicting that the Pemex decline will be much worse than what Pemex is admitting to. (Shields is predicting an 800,000 bpd drop from 2007 to 2008). Mexico may cease to be a net oil exporter as soon as 2010. Recall that the UK went from exporting one mbpd in 1999 to being a net importer in 2005.

BTW, Mexico, like the North Sea in 1999, just crossed the 50% of Qt mark (Khebab's HL plot for Mexico). But this is just another "coincidence." Continue with your plans to buy the SUV.

What is fascinating is all of the similarities between Pemex & Cantarell and Saudi Aramco & Ghawar. In both cases: Large carbonate fields--which account, or accounted for more than half of their production--where the remaining oil is between rapidly thinning oil columns between rising water legs and expanding gas caps.

Other than their production rate, the key difference between Pemex and Aramco is that Pemex has grudgingly admitted to the Cantarell decline. Note the references to Pemex cutting deliveries to refineries. Let's see where have we heard that before? I remember. Saudi Aramco unilaterally cutting deliveries to Asian refiners (below what the refiners wanted to buy).

Recall rumors of 50% plus water cuts at Ghawar and Heinberg's report, from an industry source, that Ghawar is crashing? Published reports put Saudi production in 2/07 at 8.5 mbpd, down 1.1 mbpd from their 2005 peak.

But of course, the Saudi decline is "voluntary." Dream on while you still can. Reality will be knocking on your door in the very near future, in my opinion.

http://www.eluniversal.com.mx/miami/23061.html
Pemex predicts production drop
El Universal
Viernes 19 de enero de 2007

The progressive decline in Mexico´s capacity to produce oil is rapidly becoming more worrisome than the slump in global crude prices.

According to estimates by the state oil company, Pemex, petroleum exports will decline dramatically during the Calderón administration.

Pemex is anticipating a 13 percent drop in its crude exports over the next six years as Mexico´s proven reserves continue shrinking.

Analysts contacted by EL UNIVERSAL agree that Pemex´s inability to increase production is due to waning reserves - particularly the Cantarell field in Campeche Bay which is the source of roughly 60 percent of the nation´s proven reserves - and incapacity to access potential deep-water wells.

The first symptoms of a genuine oil crisis are becoming more and more evident.

Documents acquired by EL UNIVERSAL indicate Pemex will be forced to cut back on exports to the United States. The reduction could reach 150,000 barrels per day in the next four years. In the final two years of the Calderón administration, the reduction could reach 500,000 barrels per day.

Currently, around 1.5 million barrels of oil go to the United States daily.

The potential for long-term damage lies in the fact that such a reduction could allow other suppliers - among them, Brazil, Venezuela and Canada - to permanently steal some of Mexico´s market share.

Furthermore, Pemex has already canceled shipments of crude to the Deer Park (Texas) refinery it owns along with Shell for the next 12 months. That means prices of imported gasoline and diesel may rise.

According to Raúl Muñoz Leos, a former Pemex director, the primary problem lies in the rapid decline of Cantarell reserves and the failure to develop other fields.

Muñoz said production levels rose steadily from 2002 to 2004, encouraging company directors to predict a continuation of this trend.

"We established a production goal of 4 million barrels a day by 2006, but by mid-2005 production levels began to decline," he said.

Although Pemex´s exploration budget was boosted to US$4 billion last year, the investment has yet to bear fruit.

"Since this sizeable investment has brought little in return, it might be time for us to learn from the experience of other international producers and redouble our exploration efforts," he said. "It is impossible to ignore the fact that our reserves are rapidly shrinking."

The latest official projection shows Pemex will be able to produce only 3.3 million barrels per day over the next 10 years.

George Baker, an oil industry consultant, told EL UNIVERSAL the situation is further complicated by the fact that the price for Mexico´s basket of crude - which is heavy and therefore less attractive - is so low.

"It is very dangerous to lose market share," Baker said. "Especially if your share is taken by someone who can supply lighter crude."

PMI Comercio Internacional, Pemex´s export management company, has already begun to notify some clients in the United States that it will have to cancel some contracts because production levels are declining.

Rosendo Zambrano, the director of PMI, explained that the contracts affected at present are short-term, renewable contracts that will be sacrificed due to the 150,000 barrel-a-day cutback planned for 2007-2010.

However, Pemex is also notifying clients with long-term contracts that production levels may force adjustments in contracts beginning in 2010.

"We are facing a very complicated situation that could result in the loss of more and more clients," said a Pemex official who asked to remain anonymous.

Down Under...really would like your 2 cents again on the state of Ghawar...you seem to know more about it than most here.

Nice work.

I noticed that yearly world production data for '79 through '84 will also produce a downwards but temporary trend (BP stats). Whether or not this is the real thing is yet to be determined. As for the the US, Mexico's future production is obviously extremely important. Now excuse me for being stupid, but in a previous discussion there was talk about the rapid decline of Cantarell and whether or not a couple of new Pemex projects coming online would be enough to counter this decline. Was there any consensus on this issue? Even with flat or declining demand in the US, we are still stuck with the prospect of increasing imports and Mexican petro imports are going to be hard to replace.

B.W.

I haven't read anything that indicates Mexico will be able to make up for the massive decline of Cantarell. Partial mitigation may be possible with some new fields, but it won't be enough.

Thanks for the graph. I hadnt thought about this before but does oil PRODUCTION follow technical analysis rules? Im not certain but its possible.
It is also possible that its a random walk and what we are seeing is our propensity to see and predict patterns. One of my favorite books of the last year is Fooled by Randomness. In other words, what would be fundamental reasons that oil production (rather than prices) follow behavioral rules of market analysis?

If it does follow technical rules, is this the 'pause that refreshes', or are we approaching Black Monday?

Jeez I didn't think technical analysis had any rules. What I always observed was that no matter what the market did a tech could always explain it away via some aspect , one he failed to mention before.

I thought also that technical analysis was merely trying to predict herd behaviour.

IMO the rules ALWAYS explain it 'after the move'.

Sorta like judging wine. Has a nice nose,a leather backtaste, whatever. You like the wine, you drink the wine, end of story. The rest is just dog squeeze.

I just to run with Wordens Reports. Thats how I became jaded on the whole subject. If they were so smart why were they touting and selling their analysis. Smart money would shutup and walk with the profits not try to thin it out.

My brother lost a half a million in day trading in a very short time. Died badly and poorly. He listened to much to the market.

airdale

without datamining or curve-fitting, is there any 'algorithm' that would take a sample of historical oil production numbers and predict with some accuracy what subsequent production numbers would be? Some sort of moving average or what? And, would this 'function' then work out of sample? My instinct is that its totally random.

But again, its cool to think about - that future oil production could be predicted not through Hubbert Linearization, or new fields minus old fields, or bottoms up analysis, but just by looking at a chart of oil production to date and drawing trendlines. HL is in effect 'technical analysis' as opposed to CERA and the like which use 'fundamental analysis'. But market technical analysis IS based on her mentality - oil production is made by people, but not by the 'herd' - prices represent the herd.

NEWS FLASH: OIL PRODUCTION BREAKS HEAD AND SHOULDERS PATTERN ON THE DOWNSIDE- NEXT YEARS PRODUCTION TARGET 52.5 MBPD. WITH A FIBONACCI RETRACEMENT TO 66MBPD by 2009. BUY CANNED TUNA.

Unlikely.

I hadnt thought about this before but does oil PRODUCTION follow technical analysis rules? Im not certain but its possible.

Nate, what TB was doing was not technical analysis of oil production, it was,if anything, much closer to fundamental analysis. But basically it was just showing the general trend of world oil production. Trends in oil production Nate, are very powerful and only reverse course if the trend is driven by politics rather than geology. When geology causes a nation, or group of nations, to go into decline, you can bet your bottom doller that that trend will not whipsaw you.

For instance one of my charts is of fifteen nations. That is all nations except OPEC nations and Russia, China, Brazil, Angola nd "Other". These fifteen nations peaked in 1997 and have declined every year since. And that decline rate is accelerating. In 2004 those 15 nations declined, combined, 622 mb/d and in 2005 they declined 680 mb/d. In 2006 they will be down about the same but we only have 10 months of data so far.

But the answer is glaringly simple, NO, oil production does not follow technical analysis rules.

Stocks, somewhat follow technical analysis rules but not entirely. Fundamentals determin the long term track of any stock, technical analysis only affects the short term swings.

Technical analysis affects the short term swings in the oil market also, but they affect only the price, not the production. The production of oil is affected only by geology and politics. Geology determins the long term direction but politics can sometimes control the short term swings in production.

Ron Patteson

Excellent points. The trend for crude is definitely flat to down. Also, the total liquids trend set in motion by higher priced crude is still rising, although slowly. Until the trend for total liquids plateaus and falls however, we aren't at peak.

Some here will remember Samsam Bakhtiari making fun of the IEA prediction of 19-mbd for non-conventional oil in their 1998 WEO. He was known as "Ali" back then and has deleted that article from his archives! Today, the conservative Colin Campbell is predicting All Liquids will incl a 29-mbd component for non-conv in 2010; and 32-mbd in 2020.

When i make the announcement in 2010 at TOD that we have just hit a 95-mbd monthly Supply record for the first time, can u see ron et al replying to my post saying "hey the real peak was in April 2005!"

i can hardly contain my anticipation...

freddy, if we do ever hit 95 mbpd - are you at all concerned that some % (perhaps a large one) of the additional 10+mpbd is from lower net energy sources, meaning that the 'oil' available to non-energy society could be, even at 95 mbpd, equal to or lower than today at 85mbpd?

My problem with graphs like this is the unanswerable question: is production being limited by geological and technical limitations that conceivably are predictive, as was the case with HL in the US and North Sea, for example - or is production being voluntarily limited because of reduced demand? It seems clear that the Saudis, a few other OPEC countries, and maybe the Russians are capable of self-limitation. Clearly demand has been reduced by the huge increase in price in the past few years. Furthermore there is increasing competition from alternative energy/fuel sources like ethanol. So are we looking at a graph of C+C supply, or of demand? It is obviously both, but which is the limiting factor?

or is production being voluntarily limited because of reduced demand?

Reduced demand, yeah that's the ticket. The Saudis are holding back because they cannot find buyers, the Russians cannot find buyers for their oil either so they are cutting back, so is Mexico, Norway and the UK. Even Iran and Iraq are having trouble finding buyers for their oil so everyone is cutting back.

But there is a very high demand for bridges in Arizona, wanna buy one?

Ron Patterson

We've already gone over this, Ron. When KSA announced their production cuts, inventories around the world were swelling to well above the upper range of the 5 year average. They publicly stated they had no buyers for some of their oil, despite offering an additional 5$ discount over OPEC crude. If that oil was in such need, why did no one ring them up and ask to buy some?

Only a moron would think that no one in the entire world called KSA's 'bluff' and that its all one vast global conspiracy to hide their peak.

Hothgor, we have been on this plateau for 21 months, as of October, two years as of now. And at any rate, if Saudi had kept production at that higher level, we would still be on that plateau, only slightly higher.

And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount. Why has Robert not posted this before?

As I said, a URL please!

Ron Patterson

http://www.relocalize.net/node/984

To easy. Granted this is an article from late 2005, but I want it to be noted that prices back then were even higher then they are right now, by about 13$.

OPEC crude oil usually sells for around 5$ less then WTI or Brent crude does. KSA, having lots of very heavy 'high sulfur content' oil, discounts their oil even more. Some highlights:

SAUDI ARABIA is struggling to sell its crude oil despite record fuel prices and calls on the Kingdom to bring further supplies to the market.

Saudi Aramco, the state oil company, has been forced to offer ever-greater discounts to tempt refiners to buy its product, which is shunned for its high sulphur content.

How very interesting, especially when one puts this into context for the events of the time. Katrina and Rita had just hit and roughly 1/8th of US production was offline. Prices had shot up, then came back down to low to mid 60$ a barrel. And yet...

The official selling price for Saudi oil for October delivery is currently set at a discount of more than $13 per barrel to US light crude which was yesterday selling for just under $65 per barrel.

Weak demand for Arab Light, the main Saudi crude blend, has forced the Kingdom to increase the discount from $10.45 in August to $13.40 in October.

Oh the irony of it all. Even then, KSA couldn't sell all of their oil!! At this time, their discount was an additional 8$ under the OPEC average! Clearly something must be amiss, right?

Leo Drollas, of the Centre for Global Energy Studies, reckons that Saudi Arabia may not have cut its price far enough. Despite $60 oil, there is a lot of crude sloshing about in the market? he said.

My my my, this just keeps getting better and better. Not only was Saudi oil already deeply discounted, but apparently it wasn't enough to entice more buyers to buy it!!

And just think, the huge inventory surge that RR has talked about so often was just getting started right around this time. It's amazing what 20/20 hindsight can do in regards to connecting events of the past with those of the present.

Care to go at it again, Ron?

Edit: And just to head off the inevitable 'not a credible article' comments, this article was one that was originally posted here:

http://business.timesonline.co.uk/article/0,,9072-1782657,00.html

Yes, I will definitely go at it again Hothgor. From the URL you posted:

Saudi Aramco, the state oil company, has been forced to offer ever-greater discounts to tempt refiners to buy its product, which is shunned for its high sulphur content.

The discount for heavy sour crude has, for the last two years, been in the neighborhood of $15 a barrel Hothgor, not $5 a barrel. If the Saudis offered their sour at only a $5 discount they were $10 too high.

For example, the Maya crude oil discount dropped from around $17 per barrel at the end of March to $11 per barrel in May. What's important to keep in mind is that even with the decline in the sour crude discounts, our earnings in April were the highest ever for the company and May's earnings were the second highest ever. This shows that we don't have to have record refined product margins and record sour crude discounts at the same time to have record earnings. As the turnaround season ended and residual fuel oil prices fell, the Maya crude oil discounts have again widened and are currently about $14 per barrel.
http://www.findarticles.com/p/articles/mi_m0EIN/is_2005_July_26/ai_n1481...

Although the Saudi product is light, it is still sour. Sour crude means it is high in sulfur content and must be discounted in line with the world price for high sulfur crude. If Saudi had done that they could have sold all their sour crude at the going world price.

Bottom line, Saudi did not discount their sour crude even down to the going world price of sour crude. Had they done that they would have found no shortage of buyers.

There were plenty of buyers for Saudi cour crude at the going world price. The real reason they did not sell any was that they did not have any more sour crude to sell.

Care to try another tactic Hothgor?

Ron Patterson

Your right, its not 5$ a barrel, it was 8$ a barrel UNDER the OPEC Basket Crude price. Furthermore, the article clearly showed a $3 cut that month alone to entice buyers to buy their oil. Are you honestly trying to suggest to me that because I told you before it was 5$, and it was in fact 8$ under the basket and 3$ additional at the end that I was wrong?

Your missing the entire point: KSA, even with a 13$ discount over WTI, was having trouble back in 2005 in finding buyers for their oil, just as RR has stated on numerous occasions. That means that while WTI was at 65$, Saudi Oil was selling for below 52$. I don't care HOW sour the crude is, any refinery in the first world could maintain their refinery margins with that discount.

Stop engaging in a straw man defense and 'act like a man': admit I was right and you were wrong and the debate can go forward. Otherwise, its a waste of my time to post additional articles that I have while you continue to banter about how I'm wrong even in light of the fact that my article very clearly affirms my statement ~_~

I'm eagerly anticipating your apology, Ron!

Hothgor get real! Saudi sour is not WTI! Sour crude was selling at between an $17 and $11 discount to WTI. If Saudi was discounting their sour b $8 to WTI they were still over $5 too high.

Bottom line, Saudi never discounted their sour crude to the world price for sour crude, they only offered it at a premium to the world price of sour crude.

Try again Hothgor, you failed miserably on this try.

Saudi never discouted their sour crude to the world price of sour crude, they did not even offer it at a parity to the world price of world sour crude, only at a premium. The only reason they would only try to sell it at a premium to world sour crude is they knew there would be no takers! They had no damn oil to sell so they offered it at a premium to the world price.

Understand Hothgor, there is a tremendous difference in the grades of world oil. Sour crude is not WTI and therefore must be discounted to WTI. And that discount must equal the world price of sour crude. Saudi was not willing to do that, and the reason was very likely because they had no more sour crude to sell.

Ron Patterson

RP 2PM: "And where on earth did you get this stuff about them offering a $5 discount over the going price of OPEC crude? Please supply a URL for this. This is the very first time I have heard of this $5 discount."

See Hothgor, two hours ago he admits never knowing about these types of discount. And now he's a fricken expert.

Don't bother with him. I exposed three of his lies yesterday. It took ten minutes to find. I have 50 or 60 more that showed up. On all kinds of topics; and i think everyone can see the pattern here...

His lack of judgement illustrates the difference between intelligence and wisdom.

.

You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do.

Why don't you get a life.

Ron Patterson

Ron Patterson, 7pm: "You are the liar Freddy. I did not predict any peak in 2003 as you said I did. I said that I expected the stock market to crash when the world realizes that the world is at peak and I still do."

Ron Patterson, June 11 2003: Anyway, I agree with you that we are due for a stock market crash, perhaps as early as this month. But I would not be so bold as to predict it that soon. I would guess it would happen before next summer however, likely sooner than that.

Ron Patterson, Aug 23 2003: I firmly believe however that peak extraction can come no later than 2005 and think it likely that 2004 will be the date. All that depends on the stability of extraction in Iraq, Venezuela, Nigeria and the biggest source of all, Saudi Arabia.

Freddy, you are really a dumb ass you know that. I clearly stated that the stock market guess was a guess. But that last one really takes the cake. At any rate, the stock market is not my forte, oil production is.

I stated that my belief was that peak extraction would come no later than 2005 and I hit the nail on the head! Peak extraction came in May 2005.

Oh, thanks for pointing out to the list that I guessed that the peak would come no later than 2005. I am not one to say I told you so, but I did didn't I. (That is what my aunt Fanny used to say.) ;-)

Ron Patterson

Ron, never argue with fools - people might mistake you for one and it only encourages them.

I would also like to encourage you to some extent ignore some of the participants that are "debunking" your arguments. But of course, if one spot a honest argument, it should be addressed.

IMO most people here seek the truth and do valuable scrutiny (RR) to the arguments being made. Don't waste your time on sophists.

Thanks for your great contributions.