The Oil Drum

18 comments on The Peak of Light Sweet Crude?

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Anonymous on August 24, 2005 - 8:37am

it's not true that nobody noticed that light sweet crude had peaked.

kurt wulff, whose reports to clients are made freely available (after a delay) on sunday evenings at www.mcdep.com, said at the end of 2004 in a barron's interview that light sweet crude had evidently peaked worldwide.

wulff is not a peak oil activist, he's a wall-streeter. very bullish on energy these days. he expresses his more general views in his weekly "meter reader" and "u.s. natural gas royalty trusts" reports.

he seems to understand at least part of the peak oil idea, but he doesn't let on to being overly concerned about it.

here is the key excerpt from the barron's interview, dated december 27, 2004:

"The big event of 2004 is that the oil market called Saudi Arabia's bluff. They couldn't deliver the spare capacity they said they had. It turns out they have spare capacity, but it is in heavy oil, not light oil, which is easy to refine and doesn't have much sulphur in it. It's also known as "light sweet" crude, and it produces more gasoline and more heating oil. So 2004 was the year in which the world production of light oil peaked. There are no big fields of light oil producing now that can produce more. Saudi Arabia has heavy oil to sell, but they have to discount it much more. If Saudi Arabia could have produced more light oil, they would have."

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Stuart Staniford on August 24, 2005 - 9:08am

I stand corrected! Although he can't be right on his timing (peak in 2004) if OPEC is correct that there was more light sweet in 2000 than 2004. At this point, I don't think we really have any clarity on when the peak, presumably, was. Sometime in the late 90s or early 2000s, probably.

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mw on August 24, 2005 - 9:40am

I also noted on the old Oil Drum site some time ago that the OPEC basket of oil continues to get heavier and sourer. Even then, does this mean anything? Indonesia has become net importer since.

http://www.opec.org/opecna/Press%20Releases/2005/pr082005.htm

The new ORB is made up of the following: Saharan Blend (Algeria), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and BCF 17 (Venezuela).

At present the API gravity for the new Basket is heavier, at 32.7º compared to 34.6 º for the previous basket of seven crudes. In addition, the sulphur content of the new Reference Basket is more sour at 1.77%, compared to the previous basket of 1.44%.

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wkwillis on August 24, 2005 - 9:52am

It's bad enough when our government is screwing with the inflation basket, now the market makers are screwing with our commodity baskets.

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mw on August 24, 2005 - 11:27am

The energy market is a big market; it takes a lot of muscle to screw around with. I personally think "speculation" plays a much smaller role in the high price of oil than is commonly believed.

Some "speculation" is as a result of hedging - oil BUYERS are buying because they believe prices will go higher; oil SELLERS (including oil producers), so far, have been unwilling to unload their wares at lower prices.

Of course, some of this movement is caused by emotion and herd mentality too.

Markets are a supply and demand thing. Demand has outstripped supply and thus the futures contracts head higher. Someone believes in scarcity it seems.

Speaking of demand, US total product demand hit a new 1 year high in today's EIA report, perhaps a new record high, still checking that one.