Here’s a phrase you might want to remember: necessity is the mother of invention.  Catchy, don’t you think?  What made me coin this phrase was watching last Sunday’s “60 Minutes” story about Saudi Aramco.  Among the many wonders of the guided tour hosted by the Saudi oil minister, Ali Al-Naimi, was a research lab where the Saudis are working to develop new ways to make oil into a cleaner burning and more efficient fuel.  Clearly the Saudis are concerned about the future of their primary export.  They see the …

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Among other recent reports, the Globe and Mail today published some details, posted below, of the OPEC effort to support oil prices.    Saudi makes significant oil cuts to some buyers JONATHAN LEFF AND BARBARA LEWIS Reuters November 4, 2008 at 7:29 AM EST SINGAPORE/LONGON — Top oil exporter Saudi Arabia has already cut significantly crude supplies to some of its customers, industry sources said on Tuesday, quelling doubts OPEC would stick to its latest output deal. One industry source estimated Saudi Arabia had reduced exports, as …

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I think oil will trade in a range of $80 - $100 a barrel in the foreseeable future, probably another year.  Why?  First supply and demand:  Vectors for a lower price include roughly 3 mb/d  of reduced demand from the U.S. (about 1 mb/d) and more Saudi supply (about 2 mb/d) vs. a year ago.  The rest of the world is about flat with higher demand from China, some other Asian economies and oil exporting economies more than offsetting reduced OECD demand.  On the non-Saudi supply side, more supply from …

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The report posted below from the political consulting firm Stratfor provides context for the conflicting reports I recently posted - one saying MEND (the Delta rebel army) is happy with economic reforms aimed at helping the Delta region being proposed and will therefore cooperate with the government;  the other, a few days later, declaring out and out war on the government and on oil production after MEND forces were attacked.   Apparently the government was sending mixed signals.  The complexity of this situation is explored below by Stratfor.  Note Stratfor’s …

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A report published in the Emirates Business 24/7 posted below detailing Saudi plans for increasing oil production looks very much like it came directly from the Saudi Aramco PR department.  Each of the four fields discussed in the report has been extensively analyzed in prior posts.  What is interesting is partly that this one report summarized the entire Saudi program in one place.  But even more interesting is that the report was issued at all.  It seems to be designed to assure the oil market that it will be …

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As I’ve noted before, the difference between China’s national policy on buying oil and that of the OECD in general and the U.S. in particular is striking.  The Chinese have been trying to wrap up as many direct bi-lateral purchase agreements as they can while the U.S. relies on the “free market.” The U.S. may become highly disadvantaged by being a passive observer as China takes oil off the market via long term bilateral deals.  China’s actions will result ultimately in less oil being available to the free market.  …

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According to this report from Bloomberg,  a European consultancy says that OPEC’s recent forecast of 2008 non-OPEC oil production is well in excess of reality.  It recommends that OPEC raise production (as if) and lower the prices it is demanding  for its excess heavy sour crude so as to be appealing to the market.  The implication is that OPEC is trying to keep oil prices high.  You think?  We are starting to get low enough prices that we may find out, particularly if they fall another $10 …

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Here is a comprehensive essay on the history of oil prices and a reasonable attempt to forecast them.   It come from The Oil Drum’s Australian Bureau.  Readers will find a number of similarities to my recent essay in Newsletter #16.  But it covers some additional ground using only a few well chosen charts.  I cannot recommend strongly enough that you read it. One of the interesting assertions in it is a Goldman Sachs estimate that current oil prices have reduced global oil demand by 5 …

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The table below (from this Oil Drum post), points out that global net exports of oil have been falling in 2006 and 2007.  That’s interesting, even dramatic information because it seems to go a long way to explaining why oil prices have been rising.  It also validates a position Matt Simmons has taken that shrinking global inventories are primarily the way that the world has been adjusting to demand outrunning supply in recent years. 

Another interesting exercise is to look at the net exports of …

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  WEEKEND EDITION Saudi Arabia plans royal treatment for heavy crude Kingdom to raise refining output, but plans may do little to ease high prices By Moming Zhou, MarketWatch Last update: 6:38 p.m. EDT June 6, 2008 SAN FRANCISCO (MarketWatch) — Dense, dirty and less profitable, a type of crude oil long marginalized by the global petroleum industry is attracting a wave of new refining investment as the world’s supplies of premium crude look set to decline. Saudi Arabia, through its state-owned oil company Saudi Aramco, is planning to …

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We all know that King Abdullah wears long flowing robes.  What we don’t know is what he’s got up his sleeves.  Clearly the King wants to lower the price of oil, as discussed in my prior post.   How will he do it?  We know from the market’s action this week that it would be beyond stupid for the King to do no more on Sunday than announce another 200 kb/d of Saudi production, as has already been signaled to the market.  In terms of Saudi production, the King …

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What should we make of the Saudis call for the heads of state of oil consuming and producing countries - meaning all countries - to meet to discuss oil?  Is it possible, as Mr. Market seemed to think this morning, that the Saudis would go to all that trouble for naught?    Here’s what we know:

    1. Such a meeting is unprecedented on at least two levels.  The Saudis have never before stepped up to a global leadership role and there has never been a global meeting at such a …

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The Wall Street Journal reported today that the internal use of oil in major oil exporting countries is growing so rapidly that the exporters are falling short of delivering the oil demanded by importers.  Using a country-by-country analysis of U.S. Department of Energy data, the report shows that net exports actually declined 2.5% in 2007 vs. 2006. Most dramatically, the report focuses on the internal use of oil by Saudi Arabia.  The Saudi plans for major petrochemical and aluminum industries have been and will continue to use an increasing amount …

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The following report from Reuters suggests that Al Queda is interested in playing an active role in Nigeria.  Since the country has both Christian and Muslim populations in roughly equal proportions, religion could intensify the substantial conflicts already playing out in Africa’s largest oil exporting country.  If Osama Bin Laden were to further reduce Nigerian oil exports, the net result could be to push the world toward even higher oil prices.  

A new book on the bin Laden family, The bin Ladens, by Steve Coll, was recently published.   It points out …

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The following story from Reuters quotes Saudi Aramco’s EVP for Operations Mr. Falih to the effect that KSA will maintain 2 mb/d of spare capacity going forward indefinitely.  Putting a positive spin on the problems that have delayed bringing on stream their new 500 kb/d field that was originally scheduled to start operations last December, Mr. Falih ignores the King’s recent statement canceling prior plans to extend KSA capacity beyone 12.5 mb/d indefinitely because the Kingdom needs to conserve some oil reserves for future generations. 

The new field will start production …

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