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Page added on October 2, 2015
Russia and Saudi Arabia to Continue Pumping Oil
Russia and Saudi Arabia—the world’s two biggest oil producers—indicated Friday they weren’t pulling back from huge crude output levels that have helped send prices tumbling.
Russia said it produced oil in September at levels not seen since the fall of the Soviet Union, pumping an average of 10.74 million barrels a day, government data showed on Friday. Oil production increased 0.4% from August.
On the same day, one of the world’s most influential oil ministers—Saudi Arabia’s Ali al-Naimi—said his country would continue investing in oil and gas, saying his country remained committed to energy resource development, according to a Saudi Press Agency report. The world’s largest exporter has ramped up production above 10 million barrels a day for the past few months.
ENLARGE The output from those two countries adds to an already oversupplied global oil market, even with American output showing signs of weakness. Oil prices have fallen more than 50% in the past year as world supplies outpace demand by around 2 million barrels on any given day. On Friday, they turned higher as weekly data showed a sharp drop in U.S. drilling activity.
It is also the latest indication that Russia isn’t prepared to join the Organization of the Petroleum Exporting Countries in trimming production to prop up prices. OPEC has indicated that it will only consider a cut if other big suppliers, such as Russia, join it and several OPEC members have tried to woo the country.
Mr. Naimi, speaking at a Group of 20 conference of government energy officials in Turkey, again called on non-OPEC countries to help it “stabilize the market,” though he didn’t name Russia.
“Since the 1970s this industry has been experiencing sharp fluctuations in prices—up and down—which have impacted investments in the field of oil and energy, and its continuity,” Mr. Naimi said, according to Saudi Press Agency. “This volatile situation is neither in the interest of the producing nor consuming countries, and the G-20 countries can contribute to the stability of the market.”
The pleas come as OPEC finds its typical tool for boosting prices—supply cuts—is useless without help from other countries during this period of oversupply.
Saudi Arabia’s budget, which relies on oil exports for about 90% of its revenue, has also been hit. The International Monetary Fund forecasts the Saudi government will run a budget deficit this year of around 19.5% of gross domestic product, compared with a deficit of 3.4% of GDP last year.
Oil prices have also battered the Russian economy, where oil and natural gas sales account for more than two-thirds of export revenue. The oil price slump, coupled with Western sanctions and a weakening currency, has already pushed the country into a recession which the World Bank expects to wipe 3.8% off the Russian economy this year.
In September, Russian Deputy Prime Minister Arkady Dvorkovich ruled out any cuts, saying that output may only decline if prices remain low for a sustained period. Mr. Dvorkovich said even then, production wouldn’t fall by much.
“Russia has a different approach to the major OPEC countries—it strives to produce as much oil as it can all of the time and then deals with the consequences of the price afterwards,” said Christopher Weafer, founding partner of Moscow-based consultancy Macro-Advisory. “There is no possibility of Russia cooperating with OPEC to manage supply and there is zero possibility of Russia ever joining OPEC.”
ENLARGE Last November, OPEC, the 12-nation oil cartel, embarked on a policy of defending market share by keeping its output targets unchanged despite the global glut of crude. That has battered prices, leaving countries dependent on oil revenue, from Venezuela to Nigeria, struggling to shore up their public finances.
On Friday, Anton Siluanov, Russia’s finance minister, said oil prices won’t recover as quickly as after the 2008-09 financial crisis. His ministry sees oil averaging at $50 a barrel in 2016 and $52 in 2017. Brent crude, the global oil price benchmark, was trading at $48.60 a barrel on Friday.
The government has said because of the geology and harsh climate, Russian companies can’t adjust oil output as easily as in other producing nations. Also, the depreciation of the ruble makes it relatively cheaper to produce oil in Russia, helping to preserve oil-company margins.
“The low oil prices have not had any impact on the production plans” in Russia, said Pavel Kushnir, a Moscow-based oil and gas analyst at Deutsche Bank.
The bank estimates that Russian output this year will average around 10.6 million barrels of crude a day. That is above the 10.58 million barrels a day the country produced last year, a level of output not seen since the end of the Soviet Union.
73 Comments on "Russia and Saudi Arabia to Continue Pumping Oil"
BC on Sat, 3rd Oct 2015 5:35 pm
@thomas. 😀
=LN(75,240/71,946)/7 = ~0.64%/year.
http://www.eia.gov/totalenergy/data/monthly/pdf/sec11_5.pdf
The data Marmico shared shows an average rate of ~0.52%/year, which has a familiar ring to it.
Since 2013 through 2015, there has been an acceleration of average production to ~2.2%/year, resulting in the average rate accelerating to ~0.9%/year since 2006.
Adjust for world population growth, and the average growth rate per capita is -0.2% to -0.6%/year.
Note that US kerogen production as a share of total world oil production rose from 9% to 16% from 2005-08 to date, whereas total world production ex US production is down per capita since 2005 by ~7.5%.
North American kerogen, bitumen, and light crude production as a share of world oil production has risen from 16-17% to nearly 24%.
So, to prevent a plunge in world oil production per capita, the US has had to increase unprofitable/uneconomic kerogen extraction at the fastest 5- and 9-year rates since 1927-30, even as US oil production per capita continues along the oil depletion regime at the level of the late 1940s and down 45% since 1970 and 25% since 1985.
Therefore, despite the largest world oil producers producing full out for ten years, oil production ex US/North America has fallen in per capita terms since 2005-08, and close to one-quarter of the world’s marginal production today is unprofitable and at risk of rapid depletion per capita and in absolute terms in the years ahead.
Now the US and Canadian energy sectors are going bust, risking a decline in production as the global economy decelerates and world oil production ex North America is not growing per capita.
No growth of the primary energy source for the world’s economy and civilization per capita, no growth of real GDP and trade per capita, and no future growth per capita of additional oil production as a result.
Peak Oil. LTG. Here. Now.
Boat on Sat, 3rd Oct 2015 5:59 pm
BC,
There is a fly in your ointment. The world survived the economic crash of 2007 and recovered for the most part at $100 per barrel oil. Now it is at $45 or so and consumption is growing faster. The world is adding 1-2 billion barrels a year in consumption.
I agree with you that oil per capita is down but then I remind you many countries use very little energy, have a high birth and have little impact on the energy market. It takes 8 Ethiopians to use the same amount of electricity equal to one modern refrigerator. One car per 1,000 citizens. Want a list of countries?
BC on Sat, 3rd Oct 2015 6:18 pm
Boat, yes, good point about the low-energy countries, but their economies are a small share of total GDP.
How did the world survive the crash? How much public and private debt has been added since 2008? Incremental debt service as a share of incomes and GDP?
All of that debt, including in the US, and M2 velocity to private GDP is lower, whereas real GDP per capita has grown little since 2007-08.
How much of the reported “demand” is attributable to China hoarding/storage?
If we’re rolling over again into another deflationary recession and bear market, how much bank reserves and additional debt and debt service will it require this time to “save the world”?
I study this stuff extensively for a living and have for over 25 years. The global economic and financial system is more fragile and excessively indebted than in 2006-08. Any number of “exogenous shocks” could prove to be the precipitant for another 2008-like meltdown, only likely larger this time.
marmico on Sat, 3rd Oct 2015 6:23 pm
Adjust for world population growth
Did the fuctard quart shy of oil adjust for POP? You are the consummate strawman, BC.
You gives a shit about per capita when energy intensity dominates.
Davy on Sat, 3rd Oct 2015 6:40 pm
Marmi, you are so jealous. Has BC taken over as the finacial numbers guy here on our board. He even uses Freddie fluff charts that tell a different story from marms world. Move over cowboy there is a new kid in town!
shortonoil on Sat, 3rd Oct 2015 6:56 pm
http://www.eia.gov/totalenergy/data/monthly/pdf/sec11_5.pdf
Boat, you are turning into a complete asss. That is the same data I posted, just the newest revision. You know that, if you don’t your an idiot. Why are you wasting everyone’s time?
You used to have something interesting to say even if it was usually wrong. Now you have turned into another Marmi, and Noo. A complete waste of keystrokes. Get lost.
shortonoil on Sat, 3rd Oct 2015 7:09 pm
“Since 2013 through 2015, there has been an acceleration of average production to ~2.2%/year, resulting in the average rate accelerating to ~0.9%/year since 2006.”
The extra energy that is required to produce petroleum, and its products has increased at a fairly steady 1.32 % per year. The industry is not even holding its own, and hasn’t been for quit a few years. The present collapse of shale, bitumen, ultra deep water, and others is the culmination of the effects of depletion since conventional peaked in 2005. There is no known way to reverse this trend. The industry will gradually disintegrate over the next few years. When the richest oil producing nation in the world has to start borrowing money to pay its bills you know the situation is coming to a head!
MrNoItAll on Sat, 3rd Oct 2015 8:18 pm
Boat — Conventional production may be UP by a tiny fraction of total global output in Russia, KSA and Iran for the time being, but that doesn’t change the fact that conventional oil production peaked in the 2005 – 2008 range. Production in the countries you mention went up a tiny percent, production in other countries went down, leaving us with flat-to-declining conventional oil production. Which brings me back to my original point which you must be trying to steer clear of — the only increase in oil production since 2005 — 2008 has been unconventional oil — all of financed by massive debt, fraud and propaganda. Your much touted oil production increase is a flash in the pan, a shooting star — a very short-lived and rapidly fading phenomenon. I don’t mind if you want to try to argue that the world is increasing oil production, and I don’t care if you ignore the financial and physical realities behind that increase. Your reason for crowing is coming to a rapid and unceremonious end. Nothing but bitter disappointment and crushed illusions await you. Hopefully, you’ll catch on and get with the program before that moment arrives.
GregT on Sat, 3rd Oct 2015 8:20 pm
Wow, there certainly are some folks here with very thick skulls completely devoid of content.
AgentR11 on Sat, 3rd Oct 2015 8:55 pm
A deflationary period will *not* happen; at least not in the traditional manner. QE has educated the central banks of the world how to monetize the natural deflation rate so that you drive down the value of the currency at a slightly higher rate than the underlying deflationary pressure… thus, prices for things stay about the same or experience a slight inflation, in a time that would otherwise be remembered as a deflationary depression.
makati1 on Sat, 3rd Oct 2015 9:06 pm
You reasoning sounds about right, AgentR11. But can that last? At some point, the crowd will catch on and panic will set in. Then it is “game over” for the printing of monopoly money.
Truth Has A Liberal Bias on Sat, 3rd Oct 2015 9:25 pm
Russia is running circles around USA. Again. Not hard to do these days. Iran is putting up the ground troops in Syria. Russia the air power and air defense.
Meanwhile back in USA voters are transfixed by Trump side show and defending the rights of people Asperger Syndrome to own high power firearms so they can shoot up the local college.
Only in The Retarded States of America LMFAO
http://www.debka.com/article/24875/
apneaman on Sat, 3rd Oct 2015 10:01 pm
Here is America, defender of freedom and democracy, best arms buyer and oil supplier. I guess all the 5 eyes nations support this too, since they support the empire. Take a good look.
Woman Beheaded In Broad Daylight in ‘Moderate’ Muslim Nation While Police Watch
http://www.israelvideonetwork.com/woman-beheaded-in-broad-daylight-in-moderate-muslim-nation-while-police-watch/
energy investor on Sat, 3rd Oct 2015 10:30 pm
There was a time when those of us who populate “the rest of the world” took our idea of what is happening in the USA from something as simple as the Holywood’s films.
If Boat and Marmico believe all is well, perhaps they should view two TV programs. The first is “Happy Days” (remember the Fonz?) where we were amazed at the teenagers driving cars to school and the wealth of the American middle class. The second is “The Middle” still being produced today, where a family is struggling as they lose their middle class status.
After 2008, the insolvency of the corrupt banking system that had subscribed to huge risks on the derivatives markets, was bailed out by central bankers who printed money and credit which went to the insolvent banks…not to the man in the street.
We now have a flood of articles pointing out that while the central banks did this post 2008, they cannot possibly do it from 2015 onwards. Central banks cannot keep goosing GDP stats with money and credit to replace real production and productivity. (Well perhaps they can because GDP is a monetary measure – becoming less credible as each year passes – but who would be silly enough to keep up a failed program?)
It will soon be “game over” for most of us and nowhere will that be more visible than in the USA. (well perhaps Shinzo Abe could make Japan first :-))
The next GFC is more likely to happen in late 2016 than 2015 IMHO. But shale patch insolvencies will make a splash all the same. Whether the junk bonds bust for shale plus the emerging market junk bonds bust will collapse the derivatives casino before Christmas remains to be seen…even though I doubt it.
MrNoItAll on Sat, 3rd Oct 2015 10:38 pm
energy investor (and anybody else who cares) — I took my family to see “The Martian” today — awesome movie. But during the previews, there was one where a movie is due for release that portrays the financial collapse of 2008. From what I saw, it appears this movie is going to lay bare the fraud and deceit and greed and stupidity that lead to the big financial collapse. One of the scenes shows a banker talking with his associates, and he is saying that we just barely escaped financial collapse. Coming soon to a theatre near you! — They bought some time after 2008, but it is all falling apart. This will be clear to everybody soon enough.
MrNoItAll on Sun, 4th Oct 2015 12:14 am
The Big Short, by Michael Lewis, is an amazing book about the banking crisis of 2008.
Brad Pitt, Christian Bale and Ryan Gosling to Star in Financial Drama ‘The Big Short’.
…tells the story of the build-up of the housing and credit bubble during the 2000s that led to the financial crisis of 2007-2010.
2008—The collapse
By 2008, the Wall Street investment banks were making obscene profits, but held large amounts of CDOs and mortgage bonds waiting to be sold. They were also on the liability end of huge amounts of credit default swaps, often sold and exchanged between themselves. AIG was on the liability end of billions of dollars worth of credit default swaps. Pension funds around the world had huge investments in CDOs and mortgage bonds. And then everything collapsed.
Just think, the same things that almost collapsed the financial system in 2008 are still with us, only exponentially worse. When this all unravels a second time, the only thing left of the global economy will probably be a smoking hole in the ground.
apneaman on Sun, 4th Oct 2015 12:20 am
Lawrence Wilkerson: “The Empire is in Deep, Deep Trouble”
Posted on October 3, 2015 by Yves Smith
“This is a must-watch video. Wilkerson describes the path of empires in decline and shows how the US is following the classic trajectory. He contends that the US needs to make a transition to being one of many powers and focus more on strategies of international cooperation.
The video is full of rich historical detail and terrific, if sobering, nuggets, such as:
History tells us we’re probably finished.
The rest of of the world is awakening to the fact that the United States is 1) strategically inept and 2) not the power it used to be. And that the trend is to increase that.
Wilkerson includes in his talk not just the way that the US projects power abroad, but internal symptoms of decline, such as concentration of wealth and power, corruption and the disproportionate role of financial interests.
Wilkerson also says the odds of rapid collapse of the US as an empire is much greater is generally recognized. He also includes the issues of climate change and resource constraints, and points out how perverse it is that the Department of Defense is the agency that is taking climate change most seriously. He says that the worst cases scenario projected by scientists is that the world will have enough arable land to support 400 million people (no typo).
Be sure to listen to the Q&A as well.”
http://www.nakedcapitalism.com/2015/10/lawrence-wilkerson-the-empire-is-in-deep-deep-trouble.html
BC on Sun, 4th Oct 2015 1:40 pm
@short: The extra energy that is required to produce petroleum, and its products has increased at a fairly steady 1.32 % per year. The industry is not even holding its own, and hasn’t been for quit a few years. The present collapse of shale, bitumen, ultra deep water, and others is the culmination of the effects of depletion since conventional peaked in 2005.
Right. World “oil” supply has increased primarily because of the additional ~7Mbd of uneconomic/unprofitable/unsustainable North American kerogen and bitumen extraction since 2008-09.
Thus, the sustainable (for now) world supply is closer to 87-89Mbd (average during 2008-13), which is the level per capita of the early to mid-1990s.
BC on Sun, 4th Oct 2015 1:48 pm
Right, MrNo. The TBTE banks’ offshore shadow banks’ pass-through entities’ derivatives leverage is 50-80:1 vs. 25-30:1 in 2006-08. You will not hear about this in the MSM.
Consequently, a loss of value of banking system capital as small as 1.25-2% and, by extension, the S&P 500 sustaining a 10% decline for several months, would be sufficient to blow the hopelessly levered derivatives carry trade to kingdom come, an even larger event than in 2008-10.
The Fed raising rates in this context is just plain silly.
The prospective larger deflationary fallout from such an equity and corporate bond bear market would force the Fed to NIRP and printing more trillions in bank reserves, which will push money velocity still lower and entrain the deceleration of general price inflation.
BC on Sun, 4th Oct 2015 2:14 pm
@AgentR11: A deflationary period will *not* happen; at least not in the traditional manner.
Deflation per capita of the purchasing power profits, incomes, and gov’t receipts have been underway in a secular perspective since 2000 and 2007. Peak Oil, LTG, and EOG imply that this conditions is effectively permanent.
At some point the self-reinforcing effects of the Marxian falling rate of profits conditions and the hyper-financialization of the economy (total net flows to the financial sector absorb all net GDP output per capita) will so reduce investment, production, employment and subsistence purchasing power per capita and households of the bottom 80-90% such that liquidity and household purchasing power for subsistence will decline and be intractable.
The process has been slow to date but risks another global deflationary recession and bear market.
apneaman on Sun, 4th Oct 2015 6:05 pm
Inside Saudi Arabia: Butchery, Slavery & History of Revolt // Empire_File005
“Meet the new head of the United Nations panel on Human Rights: the Kingdom of Saudi Arabia. Abby Martin takes us inside the brutal reality of this police-state monarchy, and tells the untold people’s history of resistance to it. With a major, catastrophic war in Yemen and looming high-profile executions of activists, The Empire Files exposes true nature of the U.S.-Saudi love affair.”
https://www.youtube.com/watch?v=rezvemRMelQ
Boat on Sun, 4th Oct 2015 7:45 pm
BC,
I have asked short this many times but he ignores the question. Lets see if it to hard for you.
As expensive unconventional shuts down and is replaced by oil from Iraq, higher outputs from OPEC/Russia etc. Isn’t conventional oil making a comeback in volume? So we really don’t know if conventional has peaked yet or not especially if Iran gets act together in a few years.
BobInget on Mon, 5th Oct 2015 9:13 am
Russia Poking NYT
MADRID — NATO officials issued a warning to Russia on Monday, and the United States began what officials called urgent consultations with Turkey, after Turkish fighter jets intercepted a Russian warplane that entered its airspace over the weekend.
Russia’s actions were “an unacceptable violation” of Turkish airspace, NATO’s secretary general, Jens Stoltenberg, said after meeting with the Turkish foreign minister, Feridun Sinirlioglu. Mr. Stoltenberg added, “Russia’s actions are not contributing to the security and stability of the region.”
Defense Secretary Ashton B. Carter, speaking in Madrid during a news conference with his Spanish counterpart, said that American officials were conferring with Turkish counterparts over next steps.
“I don’t believe this was an accident,” said a senior administration official, who spoke on the condition of anonymity because she was not authorized to speak publicly.
“Along with quite a bit of Russia’s behavior, this just affirms our deep concern over what they’re doing,” the official said, adding that Russia’s behavior “raises questions about basic safe conduct in the skies.”
A spokesman for the Russian Embassy in Turkey told the Russian news service Interfax on Monday that the Russian Ministry of Defense had conceded a mistaken crossing into Turkish airspace, and provided an explanation to the Turkish military attaché in Moscow.
But Russia, which began its air campaign in Syria last Monday, showed no sign that it was backing down. In fact, Adm. Vladimir Komoyedov, the head of the armed forces committee in Russia’s Parliament, told news services that pro-Russian veterans of the conflict in eastern Ukraine side will “likely” start showing up as a volunteer battalion in Syria.