Also perhaps some verification on "Twilight in the Dessert" because of a Wikileaks document, quoted on the Guardian Newspaper stating that Saudi Arabia's oil reserves were overstated by 300 billion barrels. I can hear the peak oil believers all over the globe say, "See, I told you so". The Guardian says that the U.S. fears that Saudi Arabia may not have enough reserves to prevent oil prices escalating. They say Washington needs to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels, nearly 40%.
The official, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, supposedly met the U.S. Consul General in Riyadh in November 2007 and told the U.S. diplomat that Aramco's 12.5m barrel-a-day capacity was needed to keep a lid on prices and could not be reached. The Guardian says that according to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then - possibly as early as 2012 - global oil production would have hit its highest point. This crunch point is known as "peak oil". Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.
One cable said that, "the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray." It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.” Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels.
In his view once 50% of original proven reserves has been reached ... a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output. The U.S. Consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered." Yet the Saudi official (al-Husseini) named in the Wikileaks document told Dow Jones Newswires Wednesday that he was misquoted by the U.K. by the newspaper. Peak oil folks say, sure, right.
Yesterday, we had reports of a sit in strike when 6,000 port workers were emboldened by the winds of change. Yet Reuters says that strikes by workers in companies in the Suez Canal zone will not affect Suez Canal operations and movement of ships, quoting a senior official. "The strike by companies will not affect the operation of the Suez Canal and movement of ships. These companies work in areas far from the canal zone and movement of ships," the official told Reuters. Around 3,000 workers in companies owned by the Canal authorities and based in Ismailia and Suez had gone on strike on Tuesday over pay and working conditions. Workers in canal-owned companies in Port Said will go on.
Pirates again! Bloomberg News reports that a 1,100-foot supertanker carrying Kuwaiti oil to the U.S. was seized by pirates off eastern Oman today, the first hijacking of a vessel that size since April. The Irene SL has 17 Filipinos, seven Greeks and a Georgian on board, according to a statement on the website of the European Union's anti-piracy force. It is carrying 270,266 metric tons of oil destined for the Gulf of Mexico, Enesel SA, its owner, said in an e-mailed statement. The tonnage being held is equal to 1.98 million barrels, according to a calculator on the website of the Energy Information Administration. Kuwait crude sells for $84.84 a barrel when being shipped to the U.S., valuing the cargo at about $168 million, according to data compiled by Bloomberg.
The calls for $100.00 a barrel in the near term are starting to fade away as many who made those calls are now backing off those predictions. If you were playing for $100 a barrel, maybe it's time you change strategies and adapt to the current market conditions.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.