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Saudi Arabia and that $1000 bet
Posted by Euan Mearns on March 7, 2007 - 11:00am in The Oil Drum: Europe
Topic: Demand/Consumption
Tags: oil production, saudi arabia, swing producer [list all tags]
First of all congratulations to Stuart for busting some records with his post "Saudi Arabian oil declines 8% in 2006" published on 2nd March. I was unavailable to comment that day but feel there are several cautionary observations that need to be made before jumping to any conclusion about the end of the oil age. If Stuart is right, and he may be, then the consequences may be dire.
In the last decade, monthly Saudi Arabian oil production has undergone cyclic decline on 4 occasions - 1998, 2001, 2003 and 2006. So how can anyone be sure that the present production decline signals a terminal slide in Saudi production?
Monthly oil production for Saudi Arabia reported by the International Energy Agency (eia) believed to be crude oil+condensate (C+C).
Annual oil production for Saudi Arabia C+C+NGL. From 1965 the data are from the BP statistical review.
The annual average production data from BP show that since 1970 there have been 8 peaks in Saudi oil production followed by decline. (note that BP quote crude + condensate + natural gas liquids (C+C+NGL) while the eia data are C+C). There is no disputing that the declines following peaks 1 to 7 were caused by voluntary restraint, Saudi Arabia playing the roll of swing producer. The big question is whether recent declines from peak number 8 are voluntary or not?
Stuart is arguing that at the beginning of 2005, Saudi Arabia switched from swing producer to a supply constrained producer and the main lines of his argument are:
"They have never had declining production in the face of high and rising prices before. And they have never had supply side events show through in the production profile before" (from email correspondence)
So lets examine these two cornerstones of Stuart's argument.
Oil Price
According to the Energy Information Agency (eia), the decline in Saudi production began in April 2006. The oil price was indeed still rising at this time and did not peak until June 2006. But since June 2006 both oil price and Saudi production have been falling. The June 2006 oil price peak was the final spurt of a speculative boom fuelled by rising demand for oil, a narrowing of spare productive capacity and international tension over Iran, Iraq, North Korea to name but a few tense areas.
High oil prices worked their magic, dampened demand growth and stimulated a global exploration and production effort with the oil industry working flat out, everywhere. There is no shortage of oil throughout the OECD. US and European inventories remain high.
Faced with this scenario, it seems plausible to me that Saudi Arabia and other OPEC countries have cut production in order to support prices at the $60 level which does not seem to present any problem to the developed world economies. That is what the Saudis say they have done and I can see no evidence or reason to doubt it.
Supply Side Events
So what about Stuart's assertion that commissioning of the Haradh gas oil separation plant (GOSP) is recognisable as a 300 kbpd blip on the decline curve. Whilst I am not entirely convinced by this chart, produced by averaging three of four data sources, I am happy to accept the possibility that it may be a valid observation and offer an alternative explanation.
Falling Saudi Arabian oil production, monthly averages from three sources - the US EIA, the OECD iea and JODI. From Staniford "Saudi Arabian oil declines 8% in 2006"
The Saudis have to run their oil production on different planning time scales. The planning and construction of the Haradh 3 GOSP probably took several years and of course, once complete it was immediately commissioned. At the same time the Saudis claimed they were cutting production in response to flat world demand for oil. They have done this many times before and it seems likely that inefficient production from wells with high water cut and from low permeability reservoirs would be shut down (see below). There is no conflict between the Saudis cutting production from inefficient wells simultaneous with new, dry oil production being brought on stream. The 300 kbpd blip, if valid, may therefore reflect new production coming on at a time of voluntary restraint. Mothballed wells add to the Saudi's reserve capacity.
The Smoking Gun
There has been much debate about the increase in the number of oil drilling rigs operating in Saudi Arabia which are up from around 17 in 2004 to over 50 in 2006. The fact that oil production has actually fallen whilst the number of rigs has increased in seen by many as a sign of crisis.
Saudi oil rig count compared with variations in the US rig count, believed to be onshore and offshore rigs. Whilst the relative growth in Saudi rigs is high (approximate 3 fold increase) this is starting from a very low baseline and the absolute rise of around 40 rigs over two years is trivial compared to the production volumes. International rig count and US rig count from Baker Hughes.
Another way of looking at this however, is that Saudi Arabia maintained oil production capacity of over 9 million bpd for many years with only 17 drilling rigs. The recent increase is very modest in absolute terms. The additional rigs may be drilling new developments such as Khurais, reported to be using 23 rigs, which are not yet on stream. But even when these new developments come on, Saudi production may not necessarily rise - because the market is currently satiated.
The Quality of Saudi Reservoirs
Most of the oil reservoirs in the Middle East are limestone and the quality of those reservoirs is highly variable. Without going into detail, Saudi reservoirs have two significant problems which are both related to permeability (the ease with which fluids may fow through the rock).
Low permeability reservoirs - not surprisingly, the Saudis developed their best (high permeability) reservoirs first and are now having to fall back upon the second tier, lower permeability assets. The problem is amply demonstrated in Ghawar where the north end of the field has fabulous reservoir quality, average permeability over 500 mD, whilst the south end of the field (which still contains a lot of oil) has poor reservoir quality with average permeability under 70 mD (see below). The low permeability reservoirs produce more slowly and require a larger number of wells (hence the increase in drilling rigs?). Saudi reservoir engineers will welcome the opportunity to rest the low permeability reservoirs to allow pressure to rebound as described by Matthew Simmons on p171 of Twilight in the Dessert.
High permeability streaks - also known as super-K horizons. These lead to injected water flooding producers prematurely and unpredictably giving rise to the much-publicised problems associated with water flooding and reservoir management. Again, reservoir and petroleum engineers would welcome any opportunity to trade wells with high water cut for new dry oil production.
Wells mothballed on grounds of high water cut or low reservoir pressure will benefit from the rest and when production is resumed, as needs require, they will for a short while perform much better than prior to shutdown.
| average porosity | average permeability | |
|---|---|---|
| Ain Dar | 19% | 617mD |
| Shedgum | 19% | 639mD |
| Uthmaniyah | 18% | 220mD |
| Hawiyah | 17% | 68mD |
| Haradh | 14% | 52mD |
A balanced perspective
I am trying to bring some balance to the debate on Saudi oil production. On the one hand, Saudi Aramco and the eia are forecasting "forever rising" production whilst Matthew Simmons now joined by Stuart are forecasting rapid and terminal decline in Saudi oil production. As is often the case, reality probably lies somewhere between these two extremes.- There is little doubt that Saudi oil production has fallen steadily since April 2006. The fact that this can be measured in four different ways means very little. It would be surprising if the different agencies were not in general agreement with each other.
- In my opinion, there is no hard evidence to support that this fall in production is involuntary.
- Similarly, there is no hard evidence to prove it is voluntary. But given the long history of Saudi Arabia acting as global swing producer, in my opinion, hard evidence would be required to prove that this had ceased to be the case. Such evidence may include: 1) falling global oil production 2) escalating oil prices and 3) falling OECD inventories. Right now, none of these tests are satisfied.
- Saudi petroleum engineers would welcome the opportunity to rest wells with low reservoir pressure or high water cuts and their is no conflict is substituting this type of inefficient production for dry oil production from new projects.
- I am in total agreement that Saudi oil production is entering a new era. In the past, over 9 million barrels per day could be achieved with relative ease. Their best assets are mature and may be in decline. In the future, much greater effort will probably be required to sustain production over 9 million barrels per day.
That $1000 bet
I'll bet $1000 with the first person who cares to take me up on it that the international oil agencies will never report sustained Saudi production of crude+condensate of 10.7 million barrels or more. Stuart Staniford, 2nd March 2007
High stakes and long odds! If Stuart was so confident that Saudi production was heading south for good then he would not have set the bar so high.
Forget ye not the reddits and the diggs, nor the link farms. This is a debate that needs to get as many eyes as possible...let's help Euan get readers!
Can someone please disprove this one? Show me the pipeline is officially in use or really isn't in use so I can relax.
The Saudi-Iraq pipeline
This says it was repaired and ready to go in 2002.
http://www.menewsline.com/stories/2002/june/06_18_3.html
Something is not right here. The above article says it was repaired and ready to go in 2002. Yet in 2003 there appears to have been a media campaign to state that the pipeline was unusable as it had not been touched since since 1990 when it was closed and had massive corrosion.
http://www.gasandoil.com/goc/news/ntm34663.htm
Is this one of those things you don't want to touch or you'll die like in "Syriana"?
Is it possible that stolen Iraqi Oil is being pumped to and laundered through Saudi Arabia?
My personal bet is that Kuwait is Iraq's laundry. Both based on some interesting photo interpretation from a retired Air Force colonel, and the fact that Kuwait and Iraq 'share' an oil region.
This doesn't mean that Kuwait has to have a monopoly, of course - supporting the invisible hand that runs our affairs is part of what makes the Bush League tick.
Would be very ironic. First, provoke an invasion..
Only one complaint with this theory, though: Why would Kuwait be dropping their reserves numbers, either officially or unofficially?
Reserves are one thing, oil/cash flow another.
Here is how my theory goes -
1. Kuwait is on par with Saudi Arabia in terms of its American connection - without KSA's Mecca hole card
2. After Iraq's invasion. Kuwait's infrastructure was rebuilt - and the people doing the rebuilding certainly had a longer term perspective than just the next quarterly report (remember, Bush I was in charge - and just by coincidence, a second Bush is now in charge, courtesy of several Bush I Supreme Court appointees).
3. According to international law, you just can't invade and steal a nation's resources - not that Bush II cares that much about laws, as we've seen, but there are still some constraints - notice the unsuccessful Chavez regime change.
4. After having overbuilt Kuwait's exporting infrastructure while no one was really paying attention, pointing out that the Iraqis are to blame for a drop in their exports is simple, as it certainly contains an element of truth.
5. Everybody except the Iraqis splits the cash, and drives off into the sunset. The invisible hand at work.
Actually, this is the sort of theory which could be proven to a degree - there are enough physical elements which can be checked. For example, if Kuwait had facilities to load 4 tankers a day before the Iraqi invasion, and they were rebuilt with the capacity to load 8 afterwards - or if the tanker loads from Kuwait increased measurably after the U.S. invasion. Or rig activity on the border between the two countries.
This also leads to a certain amount of speculation about reserves - perhaps the Kuwaitis were also counting on an oil bonanza to allow them to keep up the pretense that their reserves were still large, with production to match. But then, the amount of Iraqi oil to plunder was less than planned on - reality seems to be a real weak point in much of the Bush League's planning, in my opinion (ah, roses - the smell of victory). This information would be much harder to confirm, obviously.
"This information would be much harder to confirm, obviously"
I found rig count data back to 1998.
Don't see any obvious anomolies - unless, of course, the rigs have been moved to the iraqi border.
Or it was directly after GWI - anyone with better/longer data?
One of the things to keep in mind is that the Saudi King was replaced in August 2005. The policies in place before August 2005 are not indicative of the policies in place post August 2005. Specifically, the concept of what is the fair price for a barrel of oil. In August 2005 the Saudi's view of the fair price of oil moved from $25 to $60.
The same man was in charge after August 2005 as was before August 2005. Crown prince Abdullah took over when King Fahd became incapacitated by a stroke in 1995. When the King died in 2005, Crown Prince Abdullah simply took the title as king. But he had been in power already for ten years.
No power changed hands in August 1995. Power remained in the same hands as it was before the king died.
Ron Patterson
Beng the guy who has the most influence while the king is incapacitated is not the same as being "The King".
Ever notice that people don’t trot out their articles when the data contradict their prediction? But since the data support the prediction, here it is again.
http://www.energybulletin.net/16459.html
Published on 24 May 2006 by GraphOilogy. Archived on 25 May 2006.
Texas and US Lower 48 oil production as a model for Saudi Arabia and the world
by Jeffrey J. Brown & "Khebab"
Texas, like Saudi Arabia, produced at less than capacity for long periods of time, thus the following plot, based on the assumption that Saudi Arabia was likely to start declining at the same stage of depletion at which Texas started declining.
Texas, in 1972, relative to Saudi Arabia, in 2005:
http://static.flickr.com/55/145186318_27a012448e_o.png
In regard to oil prices, the average monthly Brent spot crude price was $38 in the 20 months prior to 5/05, versus $62 in the 20 months after 5/05 (within a range of $54 to $74). And of course, 5/05 was the highest crude + condensate production so far (EIA). The cumulative shortfall in what we would have produced at the 5/05 rate and what we actually produced is on the order of 366 million barrels of crude + condensate (through 12/06). BTW, I would put the most recent Saudi peak at 9.6 mbpd, in 9/05.
In my opinion, we have seen some reduced demand, primarily in poorer regions like Africa, because of a physical inability to buy energy. I think that $62 has been sufficient, so far, to balance reduced demand against lower supply. But I suspect that we are about to start a new round of bidding for declining production--and especially declining exports.
In regard to the HL model, to expect to see sustained rising production from the 60% of Qt mark, which is where Saudi Arabia currently is, is to expect to see that which we have never seen, insofar as I know, in any large producing province (60 Gb or more).
In fact, Saudi Arabia is right between the 50% mark at which the North Sea peaked, and the 70% mark, where the North Sea is currently. No one (outside CERA at least) questions the reality of the North Sea decline, so why is the Saudi decline so shocking?
While it is true that the Texas HL plot was quite noisy prior to the peak, we can get an accurate HL plot for Texas now, and the Saudi HL plot has been quite consistent. The infamous “dogleg” in the last three or four years of Saudi data was also seen right before the Texas peak.
Also, on an annual basis, the 2005 to 2006 decline in Saudi production of 4.3% (C+C) is quite close to the long term Texas decline rate of about 4%.
One thing that puzzles me is why were Iraq, Russia and “Other” able to find buyers for a total increase of about 900,00 bpd (12/05 to 12/06, C+C), but Saudi Arabia had to cut their production by about 700,000 bpd?
WT: I added this comment late to the exchange you had with RR, in response to RR, on the orginal Staniford thread:
http://www.theoildrum.com/comment/reply/2325/165766
Gregor
There are many ways to make an analysis.
I prefer charts.
If Saudi oil production were a stock, we could easily find a "rising wedge", which is very bearish for production.
Top beginning Jan. '98
Bottom beginning Jan. '02
If I knew how to upload the pic...
Graphs of the market measure human reactions in group situations. A chart of production is about geology, not human reactions (though there may be some recession/geopolitics embedded in the graph). If geology follows a graph, it would be something like a hubbert graph - not a 'rising wedge'.
Technical analysis in the market doesnt work anyways. Most people that look at charts dont make money doing so but recognize a certain pattern that worked in the past or they read about in some technical analysis book. They remember the times it worked and selectively forget about the times it didnt.
Any market chart pattern can turn into any other chart pattern and usually does.
Well, I think Geology determines where 50% is - the point at which the absolute top is reached. Not HOW we get there. Not HOW we leave there.
If you look at the oil production graph of the WORLD, you will notice that it followed a bell shape until 1974. And then?
It formed a left shoulder:-)
And did it then return to the bell curve?
No.
Why? Price restrictions, political restrictions, infrastructure restrictions. This has NOTHING to do with geology. This is what you call "human reaction" (hate to mention it, but it would concur to CERA's above ground factors).
I happen to see all this on a chart, just like I called September 2003 as the start of the oil bull market. Why? Because of the price chart (in combination wiht the fundamentals of PO and Chinese demand and especially because of the sustained price pressure after GWII was quickly "won"). My father, an old oil man, didn't believe me.
I am not going to defend chart techniques, which is more of an art than a science or whatever.
BUT I would refuse right now to BET on Stuart's conclusion that SA has maxed out because I need a confirmation from the chart - a rising wedge can break in both directions, and it has not broken yet. It is approaching its lower support line.
For what it's worth..
"They remember the times it worked.."
The problem with a lot of chart technic is that it is best seen in the rear view mirror. Sound familiar?
Besides, let's just test the hypothesis. Here's the chart:
As a trader, I would not bet on SA's fall until the line at the bottom is broken. I have a fundamental idea (call me Stuart, convinced that production has peaked) but wait for a market "signal" to make the trade..
Now, how about historical information in a field that is very humanly driven (factor "human reaction")? I'm using a much greater time frame, basically comparing apples with oranges in the two charts:
Like I said, for what it's worth..
Westtexas, I suppose many of us are quite familiar with your HL analyses, which seem to me helpful and informative. I have a few problems relying on HL analyses for SA.
1) We don't have sufficient data to say SA's Qt is what you say it is.
2) HL is not perfectly predictive. I recall one HL analysis where the predicted Qt was quite short of actual because the line trended up at a point.
In order of importance, 1) is more important that 2), and 2) injects sufficient uncertainty, for me, to prevent saying anything definitive about future Saudi capacity.
HL error is non-linear post peak its pratically nill +/- 5% at most and this is from intrinsic production issues. Leading up to the peak I'm guessing its less than 10% if your within 5% of the peak. Once more I remind Mr Rapier he promised a post on HL error.
Multi peak scenarios have their own peak issues leading to a systematic error when depending on how you convolve the peaks.
Probably a simple retreat to taking the area under the curve and constructing a total simple area is the easiest and close enough.
One thing thats not been brought out but should is the production decreases we see are generally short lived and don't actually effect the final date of peak production all that much within the error of HL analysis. The shift in a production period spanning decades is on the order of years well withing the +-5% that I think HL has.
Right now we are in the pivotal point that is either a few years post peak or a few years pre-peak so lots of room for discussion.
I have noticed that recently as peak has become a stronger possibility that we have lost sight of the fact that these few years really don't effect the final result all that much. Its a matter of peak now or before 2015 in the big picture it does not matter. Even if production increases base demand if oil was cheap is already greater than supply so the era of cheap oil is already in the rear view mirror.
We are now concerned when real shortages will develop.
Then of course the EROI peak which I think will be far worse.
Once more I remind Mr Rapier he promised a post on HL error.
As you might guess, I have had a lot going on, an inconsistent Internet connection, and frankly this has been of low priority for me. I also haven't decided the best way to approach the problem. I could start in 2000 and generate a year by year HL of Saudi (or Texas in 1960) and show how they change over time. Do you think this would suffice? It would give a series of data points that have bounced around, giving us a standard deviation for a particular time period.
Suggestions are welcome, but I can't say when I will get around to it. I have several other things I am working on, but I do agree that this would be an interesting analysis to present.
I'd say you need to show when error is bad say 20%
and work back from their I don't know what year that is
or the time scale but thats enough for some cool results.
Once you show error drops under 20% and the error bars on the years of peak drop thats enough.
I think we can safely determine when we are 20% post peak for texas. I think that everyone here figures we are less than this now for the world.
I just don't know what the resulting error spread in years is.
But running Texas/ lower 48 through this analysis will give us a excellent handle on how well we understand peak oil and we have the North Sea as a test.
In any case I think if you do this you can be 100% confident in predicting peak oil for the world within this range.
You push that we must know the right answer my response is we have enough data to be confident about the world peak within a error range. Yes it means the public will need to understand error but we have almost 100% confidence in the numbers.
In any case backing off to a 20% error range for a known case makes good sense. Initially maybe go higher but you get the drift early on HL has like 500% error bars.
memmel, you are exactly right that the position of Saudi/world production
Memmel, I believe that you are exactly right that the timing of the determination of the peak is impossible to determine with the data we have available and the important thing to notice is that the era of inexpensive crude is over. Its the unanswerable arguement for the Cornucopians.
Let them keep redefining the definition of crude to include kerogen (oil shales) and bitumen (tar sands) so that their reserve figures are preposterous, and include ethanol and buidiesel in the oil production figures. The public could care less about the number of barrels per day, but they damn sure notice a nickle bobble in price at the pump.
Hi m,
re: "Then of course the EROI peak which I think will be far worse."
Is there any way to get an analytical handle on this? Has anyone applied the methods that exist to looking at the situation we face?
I assume that you are referring to the UK plot, which showed an initial P/Q intercept of 30%. The problem with this is that there is no example of a large producing region showing anything remotely close to a long term 30% P/Q intercept. Most of them are between 5% and 10%. The only two outliers that I know about are the UK and Iran, which are around 13%.
The "Early Peak" UK HL plot is just an example of doing the HL plot too early in the data set.
The overall North Sea peaked at the same stage of depletion as the Lower 48, Mexico and apparently the world. Russia also hit a plateau at 50% of Qt.
I'd like to see a longer term chart comparing Texas and SA oil production. Did Texas have the kinds of ups and downs that SA shows when we go back to the 1960s as in the charts in the main post? Your chart overlaying SA and Texas production only takes SA back to the 1990s, where there are no peaks visible. If you're going to claim the two are comparable, let's see more data.
Euan - Dumb questions, from your post...
average porosity
19(%) vrs 14(%)
19 is 135% more than 14
average permeability
617 vs 52
617 is 1,186% more than 52
These two figures are extreemly different, and I assume permeability must be the most important one for rapid extraction. hence which field gets developed first is because of this. Is this correct?
Never mind the words should make this obvious.
If you were to compare KSA with Texas are the #'s similiar? Can the decline rates be similiar?
Does this even matter in regards to HL?
Like I said dumb questions...
Never mind (reread and think!) self answering questions.
:) I think I will go outside now. thanks
D
The distinction is that the reservoir rock in the "good" sectors offers essentially zero resistance to fluid flow. To put it in handwaving terms, there don't exist any rigs capable of drilling wells with an internal diameter big enough to take everything that the reservoir could throw at them. Whereas the hydraulic resistance of the reservoir in the "poor" areas is appreciable, i.e. you'd need to take it into account to figure a precise estimate of well flowrate. It's still a pretty damn good reservoir.
Looking at the table that Euan cited, the reservoir quality in even the "poor" areas should be enough to allow flowrates of over 10,000 barrels per day per well - possibly MUCH higher. That would be a regular cased and perforated well, or maybe even a barefoot completion in this competent limestone; nothing especially fancy, certainly not a bottle-brush.
Any "normal" oil company would gladly give its gonads for a clear run at something like Haradh.
In Ag there are terms relating to water content in soil. Between 100% dry soil(oven dried) and 100% wet soil(field capacity) there are other important conditions. Microscopically held water can exist, > oven dried, but is not available to the plants as it is held to tightly by the soil particles. Between field capacity with 0% air and microscopically held is "available water" for plants. (Generally most plants need some air around thier roots but that is besides the point).
Can I assume that oil is similiar in that there will be a film of oil left on these rocks when "available oil" is removed?
This "steaming" process, can or do they incorporate some sort of "detergent" to cut the oil loose?
If you check the link to Greg Croft you''l see that water satuartion levels of around 11% are quoted. That means that 11% of the pore volume is filled with water and the remaining 89% with oil.
Limestone reservoirs are often viewed as oil wet, i.e. it is oil that wets the carbonate matrix. During production you hope to recover 30 to 50% of the oil in place, the produced oil gets replaced with aquifer or injected water.
A lot of the oil gets left behind and incraesing the recovery of that residual oil has been the focus of much research over the years. The problem is that with water saturation over 50%, the oil gets discontinuous in the reservoir and cannot flow.
Thank you both for answering.
Obviously oil is like alot of other things - part education, part art, and luck never hurts.
Euan, Thanks for the additional educated perspective.
RE inventories: It has been mentioned, on occasion, how crude inventories can be a contra-indicator of crude scarcity. If a refiner has spare tankage and anticipates higher prices in the future (contango) he would tend to fill the tanks to the max, whereas in a market that anticipates lower prices (higher supply at the oil field) he would be relaxed about leaving a few tanks empty. Do you think this may play a part in how we read these tea leaves?
Ah, I see Gregor's post above which addresses these issues. Thanks Gregor.
Great data in this story by Stuart:
http://www.theoildrum.com/story/2006/1/28/01820/6609
He describes a slowing North American economy:
Oil consumption tends to decline along with GDP. I'm sure that KSA observed the same economic trends as Stuart and made a decision to remove production from the market and seek to maintain pricing.
As for the bet, we need Stuart to clarify what period of time is represented by "sustained" Saudi production. Euan, if you were to take Stuart up on his bet, I'll take a quarter tranche from you. Maybe RR will take another quarter tranche and then we just need a final fourth party. Note that the bet stipulates an infinite future so we can wait forever for KSA to report that 10.7 million barrels.
Of course this also means we wait forever to collect from Stuart :-)
Cheers!
Mr. account:
You have forgotten one caveat in the current state of energy consumption/production in today's "global" economy; that would be China. Their economy has grown such that they now are the second largest oil importer behind the US at about 4 million barrels per day. Their oil consumption has been growing by 10 to 15% per year for several years. Even if the world economy slows, they will still import huge amounts of oil for their economic engine that the government is controlling.
Even if its exports fall, China's GDP may not fall as fast as the US or EU because of that $1.1 trillion in cash that the banks of China can use to help keep that engine running at near full throttle.
Mr Train:
My conjecture would be as follows -
1) KSA observed possible economic decline in OECD and made decision to reduce production to protect price.
2) OECD decline was not as weak as expected plus there was additional take up from the Chinese economy as you have stated.
3) Both of the above factors resulted in rising prices in the face of pre-planned declining KSA production.
4) Price rise was exacerbated by speculators entering market. This diverted production to inventory, created problems for non-speculative buyers and triggered a speculative bubble which is now in the process of unwinding.
In addition to not having factual data on KSA fundamentals, we also lack factual data on fundamentals of Chinese economy. We also need to take into account the relatively long lag times between action and result in a fairly complex global production system.
Cheers!