[AirlinePilot]

From an excellent thread over at TOD on how the Saudis HAVE NOT INCREASED PRODUCTION measurably to replace Libya's deficit. I suggest reading the whole thing..but this chart in the comments section from Lieten caught my eye.

I'd say its nothing short of "stunning".

http://www.theoildrum.com/node/7801#comment-793278

[Daniel_Plainview]

Yep, the Saudis are on a treadmill: they're spending increasing amounts just to stay at the same place.

We're now entering our sixth year since they had their export peak and they just cut production 0.5 mb/d despite very, very high oil prices.

[Plantagenet]

Yep, the Saudis' are on a treadmill: they're spending increasing amounts just to stay at the same place.

Wow! Someone put a treadmill on top of the plateau! Better look out below if the Saudis fall off.......

[Fishman]

The parts I read didn't say the SA couldn't increase production, they were choosing NOT to increase production to rack up profits. They certainly have that option, but have generally not done this in the past since about the 70s when they saw restricting production led to such high prices that then led to global recession, and cut back in consumption. A double dip recession (highly probable now) and still high prices (say in gold, the dollar is now aproaching worthless) would be pretty clear evidence of peak oil.

[rockdoc123]

What Fishman is saying is essentially true. Saudi did increase their production in the first 2 months of 2011 by around 300 - 350 Kbopd. They said in the press they could make up any shortfalls from Libya but they did not say they intended to. The Saudis have been pretty adamant that the world is currently well supplied and I'm sure they feel quite comfortable taking a bit of OPEC production off the table to avoid a potential price collapse. Remember that you are not seeing strong draws on petroleum in the US which is still the largest consumer....current petroleum stocks are at the uppermost end of the average for this time of year.
I think it is important to understand that not everyone who likes to plot things up such as production etc. has the proper understanding of the business in order to have an informed opinion of whats going on. As an example I see on the Peakoil newspage a link to what I think is a Sandiford analysis of rigs in Saudi. He is suggesting rig rates never came up this year so it is hence obvious they can't meet the increased commitment. This is very faulty analysis as the rig work done to get to the 12 MM/d spare capacity was completed a year ago. There is no need to employ new rigs to access that production at this point in time.
So I suggest caution is needed when looking at all of these "remote" analyses.

[careinke]

The parts I read didn't say the SA couldn't increase production, they were choosing NOT to increase production to rack up profits. They certainly have that option, but have generally not done this in the past since about the 70s when they saw restricting production led to such high prices that then led to global recession, and cut back in consumption. A double dip recession (highly probable now) and still high prices (say in gold, the dollar is now aproaching worthless) would be pretty clear evidence of peak oil.

While I agree with your assessment, another possibility is the House of Saud, (who are very pissed at the West for not backing Mubarak), may be flexing some economic muscle right now.

[Fishman]

Agreed Careinke. If true they should bump up production shortly, reminding your friend who supplies the goodies is different from intentionally creating an international depression. Pstarr, if you are correct then Libya's lack of production should shortly destroy the bridge.

[copious.abundance]

Did anyone consider the possibility they just couldn't find buyers for any extra oil? Since the world market is well-supplied, why would anyone want to buy extra of something they've already got sufficient supplies of, whose price just suddenly jumped by some 15%?

You doomers spend so much time focusing on the supply side, you forget the demand side.

[AirlinePilot]

rockdoc,

I think somewhere over at TOD Stuart did note in updating his rig count that Saudis have ramped up rig count significantly in the last few months.

[copious.abundance]

I tried to link to Stuart Stanifor chart at TheOildrum today (too may pixels). SA has not nearly compensated for offline Libyan crude. Libya production has fallen 1.2 mbpd, while SA has only increased by .2 mbpd ...

Yeah, but notice from the same article that *world* supply only fell by 0.5 mbpd in March - which means that non-Saudi/non-Libya producers bumped up supply by a half-million bpd. This would also help explain why KSA felt no compelling need to make up the full 1.2 million bpd loss of Libyan production. Others were already taking up some of the slack for them.

Also, people are quick to shout, "KSA didn't make up the full production loss!!" and get all excited, but I don't recall KSA ever saying their spare capacity could be switched on and delivered overnight. It takes time to turn on pumps, pump the oil into pipes, get it into storage tanks, make arrangements for tankers to arrive, wait for aforementioned tankers to arrive, and deliver said oil. It's not like you can do all that in a few days, or even a few weeks.

[Keith_McClary]

While I agree with your assessment, another possibility is the House of Saud, (who are very pissed at the West for not backing Mubarak), may be flexing some economic muscle right now.

I've been wondering about the House of Saud. Do they expect to be around for long? I think they must be stashing as much $ as possible offshore in case they need to make a fast exit with their heads still attached.

There is amazingly little speculation about how their regime might collapse or the consequences - seems to be in the "unthinkable" category.

[Keith_McClary]

Did anyone consider the possibility they just couldn't find buyers for any extra oil? Since the world market is well-supplied, why would anyone want to buy extra of something they've already got sufficient supplies of, whose price just suddenly jumped by some 15%?

Yeah, and if the price jumped by several hundred % (which it did over the last few years) they would have even less desire to buy. If the price gets high enough, nobody will want the stuff, so the market will be well supplied by teacups of oil.

[mos6507]

This thread should be merged with the speculators thread. There is obviously a connection here, namely, that supply shortage is not the main factor driving high prices lately.

[rockdoc123]

rockdoc,

I think somewhere over at TOD Stuart did note in updating his rig count that Saudis have ramped up rig count significantly in the last few months.

I haven't been over there in the last couple of days. I caught Sandifords first post and then the more recent one about a drop in rig useage from the news page on PeakOil.
I think the important point here is that any relation of production rate to rig rate is nebulous. For exploration/development wells it takes months to years from the time a well is complete to when it can actually be turned on. As an example at Khurais they started the drilling campaign a year and a half in advance of bringing on first production. It takes that long to get all the wells drilled, completed tied-in and then all of the requisite facilites built. For completion wells they could be doing any sort of business including workovers totally unrelated to turning on additional production. The 300,000 bopd that the Saudis brought on as additional production was sitting there ready to go as spare capacity....i.e. it didn't need rig work.

[careinke]

While I agree with your assessment, another possibility is the House of Saud, (who are very pissed at the West for not backing Mubarak), may be flexing some economic muscle right now.

I've been wondering about the House of Saud. Do they expect to be around for long? I think they must be stashing as much $ as possible offshore in case they need to make a fast exit with their heads still attached.

There is amazingly little speculation about how their regime might collapse or the consequences - seems to be in the "unthinkable" category.

I've been predicting the fall of the House of Saud since the first time I went there in 1979. Now I think it will never happen. Those guys are masters at political maneuvering. This time they obviously paid off the religious police (Matawa), the Matawa started preaching against protesting since shortly before Mubarak's fall.