Tremain, yes such variation is pretty well normal for Saudi. I think they are pumping as much as they possibly can so their production figures reflects new oil here and declines there. According to Wikipedia Oil Megaprojects Saudi is supposed to have 908 kb/d of new oil coming on line in 2008. I think that is an exaggeration however no doubt they will bring, and have already brought, some new oil on line this year. Remember most of this new oil will simply replace declines elsewhere.

That is the real story. In fact, that is the story all over the world.

Ron Patterson

From the Saudi announcement linked above:

"This [12.5Mbpd] is sustainable for as long as the market needs it."

I would assert that the "market needs it" in perpetuity, which renders such a production rate NON "sustainable." Do these people even bother to read or think through their announcements?

on the other hand, 500kbpd means that roughly 70 milion dollars a day will stay in developped countries, instead of going to saudi arabia.

that's a lot of money. maybe some of that money will go into renewable energy

Here's the statement from the report supporting the news item in yesterday's drumbeat. Yesterday's MEES report said demand would fall 500k/day but the actual published OPEC report is even worse and says 710k/day (although the difference between 32.0 and 31.2 is 800k so I presume there's some rounding going on)

The demand for OPEC crude in 2008 is estimated to average 32.0 mb/d, a decline of 90 tb/d over the previous year. In
2009, the demand for OPEC crude is expected to average 31.2 mb/d or 710 tb/d lower than in the previous year.

The important thing to look at is how oil is moving month to month what you see is that the surge months seem to always be lead by decline months and more importantly any increases seem to be temporary i.e less than sixty days followed by a slow down. And as noted overall production with a running average is lower.

My conclusion is that changes in production reported are actually changes in storage levels in the producing counties real production is probably pretty much flat out.

Understand that before this year seasonal demand fluctuations resulted in demand still dropping below production capacity in the spring and fall. Starting last fall the seasonally caused spare capacity seems to have evaporated.

I do get a tanker tracker report and from it it seems that exports have been pretty much flat but with ships taking turns sailing east then west. So you have a number of temporary storage shell games in progress.

1.) Production is pretty much flat out but.

1.) For two months send excess to storage and claim higher production numbers.
2.) For two months claim even higher production numbers as storage is drained.
3.) Send extra oil east for a few months refilling storage in asia
4.) Send extra oil west for a few months refilling the EU/US ( lower imports to Asia )

However overall this year your seeing a persistent storage drain.

To me at least its really hard to split out the lower production from export land however I believe that lower production is playing a big role because fungible side products of refineries like bunker fuel are in short supply globally. Part of this of course is a move to complex refining but even with that if KSA was refining the oil you would expect them to be taking a larger role in the Bunker fuel market.
But we have no sing of excess production from Export Land refineries this is not definitive because they could be burning residuals for electric generation. But bottom line is we seem to have both production and export land problems even though splitting the two is very difficult.

So it looks like we probably have a combination of a slow decline in production of good grades of crude and export land.

Finally I mention good grades because it looks like some heavy sour crudes are not being purchased so some spare capacity exists for those and this is also contributing to changes in the numbers as these are discounted enough to sell. This is my heavy-sour/ NG problem.

Every thing seems to be on various 2 month like time tables so you have sort of a natural 4-6 month cycle with real inventories lower if smoothed over say 3 months and production lower. Whats critical is that you have no signs of any sustained production increase and plenty of indications that storage is being manipulated world wide to stave of shortages.

My best guess is we are down about 2mbpd in production from the real peak in 2005 with the recent reported peaks a figment of OPEC's imagination they don't even show in the ship tracking. I think export land has us down on top of this at least 1mbpd for a net decline from a 2005 peak in exports of about 3mbd. This is sufficient to initiate real post peak problems I have that at 4mbd down from real peak and we are if you look around rapidly approaching post peak like symptoms. Also 3mbd fits very well with the current price levels and storage levels.

My best guess is that by this winter serious shortages will develop somewhere in the 2nd/1st world that cannot be papered over by this shell game.

The increase in complex refining capacity and even using cokers on the residuals from light sweet refining is probably all that has kept up running this year and its taken its toll on NG prices. Given that the biggest oil users now pretty much all have complex refining I don't expect significant gains from more complex refining to help in fact we have excess refining capacity this year. Next of course the death of the housing industry in the US and world wide will act as a fairly big demand drop thats helping and will continue to help some even into next year. Thus the only good news as the continued popping of the global housing bubble is reducing demand to some extent. This is at least temporarily lessing the impact of what I believe is a real decline of 3mbd and of course initial conservation efforts are playing a role.

Thus it seems the first big peak oi/export land event besides rising prices will probably be a fuel shortage esp diesel in the southern hemisphere as they enter their growing season and summer.

Our diesel shortage should become acute and demand for heating oil and diesel for planting in the south clash. And a chance for a silent spring in the Northern Hemisphere as the sound of diesel trucks and farm tractors does not fill the air.