Oil production and Iran

Comments from Mike Ruppert: 

In January of 2002, almost ten years ago exactly, my newsletter From The Wilderness described the exact situation we find ourselves in -- as a planet -- today. As Dale Allen Pfeiffer so accurately foresaw, we are now living in a world in which OPEC is politically and economically dominant. It is not just Iran that must be recognized as having the clout to end economies, it is every OPEC member nation.

As of yesterday, with Iran's stated (and hastily retracted) announcement of a cessation of sales to the most crippled nations in Europe, the industrialized west is now in a beggar status when it comes to oil.  

All of the lies about abiotic oil and all of the cooked books and pronouncements of great finds of "shale oil" and "heavy oil" (neither of which actually are oil) now lay bare and exposed for the world to see. 

For if all this energy abundance, so proclaimed by the liars and frauds like Daniel Yergin of CERA were true, we would see them being rolled out right now. There is no other time. There is no other place.

For the rest of my life I will mark Feb. 15, 2012 as the date on which western dominance of world affairs ended. All Iran, or for that matter any OPEC or other oil producing nation, has to do is just threaten to cut of oil supplies and obedience will follow. Those that have the oil now make the rules. -- MCR

Risks to Global Oil Supply Rival Late 1970s: Report

The potential threats to the global oil supply—especially Iran's vow to close the Strait of Hormuz—have not been this great since the Iranian Revolution and Iran-Iraq War three decades ago, according to a report by Deutsche Bank.

CNBC,

15 Febraury, 2012

By: John Melloy

Executive Producer, Fast Money & Halftime

“In our view, not since the late 1970s/early 1980s has there been such a serious threat to oil supply”, wrote Soozhana Choi, Deutsche’s head of Asia commodities research, in a note to clients today. “Our assertion is in part because of the Iranian threat to close the Strait of Hormuz.”

The report goes on to list the other oil “hot zones” as Iraq, Libya, Sudan, Nigeria, Syria and Yemen.

The biggest concern, however, is the strait through which more than 15 million barrels a of crude a day flow out from the Middle East. The North coast of the strait is Iran.

“We view potential Iranian disruption of shipping in the Strait as a low probability given the high damaging impact it would have on Iran itself,” said Choi. “However, the mere utterance of such a threat is a grave concern for the oil market given the strategic importance of the Strait on a global scale.”

Crude oil climbed higher Wednesday after Iran warned European purchasers of its oil that it may preemptively cut off supplies before they have a chance to install an embargo. Italy, France and other European nations have been pressured by the U.S. to place an official embargo on Iranian oil because of the rogue nation’s continued nuclear program pursuit.

The worry is that Iran may issue a similar verbal threat regarding the Strait of Hormuz, which could do as much damage as actually attempting to block it.

“I agree, but for a different reason, which is not the threat of closing the Strait of Hormuz, but rather from potential military action against Iran,” said Stephen Weiss of Short Hills Capital. “The spike in oil will add to economic pressures and increase probability of a deep recession in Europe.”

While Deutsche Bank said this it was not making an official prediction of what could happen to oil prices if one of these disruptions come to fruition, it did calculate in the report that the last four major oil disruptions (Gulf War I, Gulf War II, Iran-Iraq War, Iranian Revolution) caused Brent oil prices to jump 38 percent, on average, during these events.

To be sure, some people said traders are overreacting by pushing WTI Crude above $100 this week because of these empty Iranian threats.

“I disagree completely,” said Dennis Gartman of The Gartman Letter. “The world is facing an over-supply of energy, not an undersupply, in the very near future. There may be trouble in the Persian Gulf or one of the other ‘hot spots’ around the world, but there is no tightness of supply given the huge new finds of oil and nat-gas.”

Let's unravel some of the lies here. First, Saudi Arabia has never produced more than 10 mbpd of conventional oil. The IEA figures include natural gas liquids like propane and butane. Second, with Saudi Arabia already in serious decline, the kingdom has, for at least a decade, been maintaining oil production via secondary and tertiary recovery involving expensive and energy-intensive water injection to scrub reservoirs and add pressurize what they are sucking from badly depleted reservoirs. As Saudi Arabia increases these recovery methods they risk damaging the geologic reservoirs and collapsing them.

All of that said, Saudi production is declining rapidly. Now I'll repeat the question From The Wilderness started asking a decade ago and nobody in power saw fit to answer while we had some time... Now what? -- MCR

IEA sees decline in Saudi oil output

PARIS, Feb. 15 (UPI) -- Though expectations are dampened, oil production from Saudi Arabia could hold steady as the government pumps more money into the oil sector, the IEA said.

The International Energy Agency lowered its estimate of Saudi Arabia's oil output from 12 million barrels per day from January to 11.88 million bpd in its latest February report.

State-owned Saudi Aramco estimates it could produce as much as 12.5 million bpd and the IEA had raised its estimates for Saudi Arabia steadily in the past 10 years, the Financial Times reports.

Riyadh has said it would need at least 90 days to reach the 12.5 million bpd threshold. The IEA, however, bases its estimates on a "capacity level that can be reached within 30 days and sustained for 90 days," the newspaper adds.

IEA Senior Analyst Diane Munro told the Financial Times that the February assessment reflects a natural decline in Saudi Arabian oil fields. That rate is estimated at around 3.5 percent per year.

As the kingdom pumps more money into production, however, natural declines should slow, she said.

"We are reviewing our estimate of Saudi's natural depletion as Saudi Aramco appears to be bringing in more rigs and that should help to stem the natural decline," Munro was quoted as saying.

Riyadh had said it could make up for the loss of any Iranian crude on the international market. Iran's state-funded broadcaster Press TV reported Wednesday that exports to six unnamed European countries were cut.