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Oil Hits $104 as OPEC Rebuffs Bush

Jad Mouawad, New York Times
Oil prices reached a record close, surging above $104 after OPEC decided Wednesday to keep its production unchanged. The cartel ignored calls from President Bush to pump more oil into an ailing economy.

OPEC rebuffed its top consumer, arguing that the world was well supplied with oil and blaming financial speculators and mismanagement of the United States economy for the current high prices.

But the Organization of the Petroleum Exporting Countries was not completely oblivious to the political and economic impact of $100 oil. The sharp surge in prices recently has deterred the group’s ministers from cutting their production, a move they seriously contemplated a few weeks ago to offset a seasonal slowdown in global oil demand in the second quarter.

With the United States economy slowing down, oil prices have risen sharply as investors seek refuge in commodities like oil and other hard assets to offset the drop in the value of the dollar and hedge against inflation.
(5 March 2008)
Normally, oil prices fall as economies slow down, but Jad Mouawad sees the opposite behavior taking place. -BA

Related: Opec dashes oil supply rise hopes (BBC): “The head of Opec, the cartel of oil-producing nations, has said it is unlikely to increase production at this week’s meeting.”

Non-OPEC Oil Production Likely to Disappoint Over 2008, Analysts Say

CEP News, Canadian Economic Press
Non-OPEC oil producers were unlikely to improve their production over 2008, in a year when the market most needed their output to rise and make an considerable impact, analysts said on Wednesday.

Russia seems to bear the brunt of analysts’ ire. Kevin Norrish, commodities research analyst at Barclays Capital, said, “The latest data from Russia revealed that oil production was at 9.79 million barrels barrel per day (bpd), unchanged from 9.78 million bpd in January and down year-over-year for a second consecutive month.”

Norrish said disappointments were not limited to Russia as the recent flow of data suggests continued positive demand conditions yet parallel non-OPEC supply weakness.
(5 March 2008)

Saudi Arabia’s Crude Oil Reserves Propaganda

ace, The Oil Drum
Executive Summary

1. Saudi Aramco has effectively used propaganda methods for at least the last fifteen years to convince many governments, corporations and individuals to believe their statements. However, Aramco’s statement that it is the world’s leading oil producer is now false as it now second after Russia since 2006. Nevertheless, Saudi Aramco’s repeated statement about remaining recoverable oil reserves being 260 billion barrels (Gb) is still generally accepted.

2. In 2004, Saudi Aramco stated that its oil initially in place (OIIP) has been growing steadily since 1982. There is considerable doubt about the validity of this increase, given the lack of new oil discoveries and the unusual nature of its steady continuous increase. Aramco stated the OIIP was 700 Gb at year end 2003 while a more realistic estimate is 580 Gb.

3. Aramco may have some high recovery factor fields such as Abqaiq and Shaybah, but an average recovery factor range from 30-37% is assumed for the total OIIP in Saudi Arabia’s fields. The trend of the recovery factor for Saudi Aramco indicates that there has been no effect on the recovery factor by recent technological advances in producing wells. Saudi Aramco has kept remaining recoverable crude oil reserves constant simply by artificially increasing the OIIP each year since 1982, accompanied by an unrealistically high average recovery factor of 52% since 1988.

4. Saudi Aramco’s propaganda campaign is failing. Saudi Aramco is no longer the world’s leading crude oil producer. Saudi Aramco’s statement of 260 billion barrels of remaining recoverable reserves is almost certainly false. Instead, the remaining recoverable crude oil reserves are probably less than 100 Gb, instead of 260 Gb. It is time to call on Saudi Aramco and the other OPEC members to tell the truth about their reserves.
(4 March 2008)

Merrill Lynch: Oil scarcity will dampen world economy
Interview with Francisco Blanch, Merrill Lynch’s head of global commodities research in London.
(5 March 2008)
Contributor driller writes:
Just a short note about this video, which i find quite impressive.