
The Saudis Are Lying About Their Oil Production? - olivermarks
https://oilprice.com/Energy/Crude-Oil/Why-The-Saudis-Are-Lying-About-Their-Oil-Production.html
======
olivermarks
Comment by Dr Mamdouh G Salameh, International Oil Economist Visiting
Professor of Energy Economics at ESCP Europe Business School, London is also
interesting. No way of verifying accuracy.

'Having done a lot of research and analysis for years about Saudi proven oil
reserves, I reached the final conclusion that Saudi reserves couldn’t be more
than 55 billion barrels (bb) rather than the 266 bb the Saudi have been
claiming for years.

Moreover, the Saudis haven’t been transparent enough about their production
capacity. Their oil production peaked in 2005 at 9.65 million barrels a day
(mbd) and has been in decline since. In my estimate, their production capacity
doesn’t exceed 8.5 mbd. Moreover, they never had a spare capacity of 2 mbd as
they have been claiming because to have such a spare capacity would mean that
their production capacity is 12 mbd and this figure has never been tested.
When they say they are producing 10 mbd, at least 1.5 mbd come from their
stored crude.

With estimated stored crude oil of 130 million barrels , the Saudis could
continue to meet their customer needs for less than a month after which their
stored oil would have been totally exhausted. The proof they aren’t telling
the truth about the timetable for repairs is that they have been telling their
customers that some lighter grades would likely be replaced with heavier crude
grades.

The truth about Saudi oil potential and reserves will eventually come out. And
when it does, the global oil market will get the shock of its life with a
horrendous global oil crisis to match.'

~~~
colechristensen
>the global oil market will get the shock of its life with a horrendous global
oil crisis to match.

It won't.

There is a very large amount of oil production on hold or at low capacity in
North America because the prices are currently too low and very much expected
to go higher in the future.

Prices will rise up to 50% but that isn't much of a crisis or unprecedented.

Renewables will become more attractive and their growth will accelerate a
little.

~~~
Voloskaya
> "Prices will rise up to 50% but that isn't much of a crisis "

If a 50% price increase isn't a crisis, then what is?

~~~
aussiegreenie
Oil prices are ___VERY VOLATILE_ __in the last 50 years the number of times
the price of oil has either halved or doubled with a year is not uncommon. It
has occurred at least a dozen times.

And more importantly, oil prices are less important to the economy than most
people believe.

TL: DR - Oil prices are not that important

~~~
BlueTemplar
So, it's a coincidence that oil prices peaked during the 2008 crisis?

~~~
linkregister
Once the housing crash occurred, demand plummeted and the price of crude
dropped. So yes?

~~~
BlueTemplar
You're proving my point that they are tied ?

~~~
diffeomorphism
Correlation does not equal causation.

~~~
BlueTemplar
You don't think that steeply increasing gasoline prices, and the resulting
squeezing of discretionary (and not so) income could have popped the US
housing bubble ?

[https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-a...](https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-average-
historical-annual-gasoline-pump-price-1929-2015)

------
the_duke
Clickbait title, bad article (completely unsubstantiated/unsourced, openly
hostile, ...), and a pretty horrible website in general.

SA inflating their production and capacity numbers is perfectly possible (and
probably likely), but that kind of writing is not exactly trustworthy.

But some things to think about:

* With modern drone/missle capabilities, it seems quite easy to severely compromise global oil and gas production with just a few targeted strikes; mainly on the big refineries. Quite scary.

* Is Iran, after years of fighting proxy wars, now moving towards more direct conflict with Saudi Arabia?

~~~
Expez
Guarding a refinery is at least doable in principle, but most oil is
transported there by way of a pipeline. Guarding miles and miles of pipes in
the middle of nowhere is going to be prohibitively expensive.

The Trans-Arabian pipeline for example is a whopping 1214 km (754 mi) long[0]!

[0][https://en.wikipedia.org/wiki/Trans-
Arabian_Pipeline](https://en.wikipedia.org/wiki/Trans-Arabian_Pipeline)

~~~
mrfusion
754 security guards on dirt bikes with radios? Maybe a helicopter on standby.

~~~
DuskStar
Ah yes, "dude on a dirt bike with a radio and rifle" \- the supreme air
defence asset of our time.

Seriously, this might work for stopping people walking up to the pipeline with
explosives - but it wouldn't stop someone with an RPG, recreational drone or
(lol) cruise missile.

------
cascom
A truism at the commodities hedge fund I used to work at was the "the Saudis
are always lying" along with "never be long a country's currency if they have
their own word for afternoon nap"

~~~
Jweb_Guru
I think that says more about the hedge fund you worked at than it does about
the wider world, to be perfectly honest.

------
duxup
I thought it was common for everyone to lie about their oil production for all
sorts of reasons and everyone knows it.

Half the battle within OPEC was over who lies how much and everyone coming to
the table to figure that out and come to guidelines about production that are
largely general guidelines in practice. Sort of "Ok everyone we're all way off
the agreed numbers way too much let's dial it back for a bit." agreements.

I want to say that I've heard representatives in OPEC have openly say such
things plenty of times.

~~~
secfirstmd
Not just lieing about oil production [https://www.reuters.com/article/us-gold-
swiss-fakes-exclusiv...](https://www.reuters.com/article/us-gold-swiss-fakes-
exclusive/exclusive-fake-branded-bars-slip-dirty-gold-into-world-markets-
idUSKCN1VI0DD)

------
jnurmine
I'm trying to understand what all this means.

The recent attacks are said to have cut Saudi production by 50%.

The Saudis claim production capacity of ca. 12 mbd. 6 mbd lost to attack.
Their estimated stores are at ca. 180 million barrels.

To keep a happy face, the Saudis could sell from their stores to offset for
the loss of Abqaiq and Khurais, but this can only be kept up a limited time,
as the store is empty in roughly 30 days.

The time to fix the damage has been estimated at 8 months.

Does this mean the Saudis face losing 50% of their oil income in about 30
days?

~~~
onlyrealcuzzo
That means they'll be eating King Salmon for dinner in 60 days.

------
eisa01
How reputable is the oilprice.com?

I see articles linked quite often on EV forums I follow

I only remember Upstream [1] from when I was briefly in the oil industry ten
years ago

[1] [https://www.upstreamonline.com/](https://www.upstreamonline.com/)

~~~
sambroner
I'd love an answer to this. The article was very aggressively written and I
have no basis for understanding any bias _if_ there is one.

~~~
adventured
Oilprice.com is kind of like Forbes is today. Filled full of articles written
by freelancers. Some of them are good, some of them are terrible. You have to
know the writer, primarily, to sift through the rubble of the site.

I've read the site on an occasional basis for years. Usually I only end up
there when looking for recent production updates. They often have good
industry updates on production, expansion, etc. There is also plenty of
quackery, over the top conspiracy writing, mediocre speculation and very
questionable pumping & bashing.

~~~
sambroner
Thanks.

------
SanchoPanda
>Once the hedge funds, who had handily positioned themselves long some days
before the attacks, had taken their profits...

This implication is so far beyond the pale it borders on satire.

~~~
mirimir
Why "beyond the pale"?

Maybe those behind the attacks also went long, and some hedge funds picked up
on that. Or maybe they just did a better job of understanding the escalation
in recent months.

------
quattrofan
Ah reminds me of the famous leak on Oil Production here:
[https://en.m.wikipedia.org/wiki/Contents_of_the_United_State...](https://en.m.wikipedia.org/wiki/Contents_of_the_United_States_diplomatic_cables_leak_\(Saudi_Arabia\))

~~~
kamyarg
Non-Mobile link:
[https://en.wikipedia.org/wiki/Contents_of_the_United_States_...](https://en.wikipedia.org/wiki/Contents_of_the_United_States_diplomatic_cables_leak_\(Saudi_Arabia\))

------
m23khan
question - what do Saudis gain from inflating their production capacity and
oil reserves? Do they want to come across as some sort of superpower /
critical country based on their reserves -- to continue getting preferential
treatment from rich countries?

~~~
audiometry
Their Aramco IPO valuation will, at least partially, be a function of their
reserves. Aramco IPO is critical to Saudi financial circumstances.

~~~
pas
Isn't that practically cancelled?

~~~
audiometry
No, they're forging ahead with it. WSJ Today says that MBS wants to float not
just 5%, but eventually up to 10%.

~~~
dagw
What MBS tells the press he wants to do and what actually ends up happening
isn't always very well correlated.

------
cat199
"This is despite the all-out oil price war that Saudi started in 2014 against
U.S. shale producers to try to destroy the industry through low prices caused
by flooding the markets with oil. “If the Saudis had anything near 12 million
barrels per day capacity, that would have been the time to pump it but all it
managed was just under 10 [million bpd] with 10.5 [million bpd] managed for
just one month over that two-year period [2014-2016 before Saudi reversed it
strategy],”

Would it have been the time to pump it? If the goal was just to impact US
shale producers, why also undercut your own sales? The best strategy factoring
in shale-targeting AND profits would be to pump just as much as to impact
shale producers, but no more.

Also, another angle as hinted at from conclusions, but not included:

"Saudi Arabia ends up boosting the bank accounts of the very people that it
thinks was behind the attacks on its own oil infrastructure, the Islamic
Revolutionary Guards Corps "

but, counterpoint, if they pumped too much at that time, dropping prices
against US interests, when the political climate was more favorable to Iran,
trade talks could have further favored Iran as a counterbalance, if for no
other reason than to 'keep the saudis in line'.

i have no direct knowledge, but the analysis is quick to highlight some angles
and not others.

------
DSingularity
“ the hedge funds, who had handily positioned themselves long some days before
the attacks”

Wow, really? Would love to see numbers. Sheer luck or conspiracy?

~~~
audiometry
It's nonsense. This website, and this author in particular, are very low
quality. A couple weeks ago spun a meeting between China FM and Iran FM as
some massive 25 year oil development/marketing deal with China. All unsourced.
And almost all of it unsubstantiated by anyone except vague anonymous sources.
Wrapped around a kernel of truth (the Iranian and Chinese FM did meet the
preceeding week).

Regarding his accusations that hedge funds knew Iran would attack Saudi that
weekend.... zzzz 1st there are few commod-specific hedge funds left, 2nd macro
funds currently hate oil if anything, and don't have big positioning in either
case (see CFTC data), 3rd any oil specialist that is long was/is long because
our markets are very tight currently -- crude oil markets are strongly
backwardated (implying urgency to acquire spot barrels) and refining margins
are large globally. The Iran attacks were a (fleeting) side benefit and are
very nearly lower than they were before the attacks now.

Reading this sort of garbage on oil markets always reminds me the Gell-Mann
effect must be real and I should quit reading news in other domains, because
it's probably as crap.

------
neoplatonian
Ok. So let's say I believe in this, with the implication that oil prices in
the future are likely to go up. Any investment advice? How can one - say a UK
taxpayer - profit off of this investment thesis?

~~~
matwood
Not advice, but you can trade oil futures and options if you have belief in
your thesis.

~~~
SimonPStevens
Except, if other people already have the same belief, won't it will already be
priced into any oil futures prices.

So that only works if it's a belief you hold, but you also think that others
believe the opposite.

------
PetroOption
Peak Oil as a concept for production in a conventional reservior makes sense.
It's on a time frame/size that makes sense. Reserves are not explicity
capacity based, reserves are heavilly economically based. As price increases
you get more reserves despite having produced oil. This, in addition to
technological changes, allows for increased reserves and is why global peak
oil as a concept is a bad predictor. Global peak oil was originally predicted
to be 1970's.

Edit: grammer/spelling

~~~
BlueTemplar
No, it wasn't? Reread the paper... (Also, it already tends to take technology
improvements and prices into account...)

------
voisin
Worth a read: Twilight in the Desert: The Coming Saudi Oil Shock and the World
Economy by American investment banker Matthew Simmons.

[https://en.m.wikipedia.org/wiki/Twilight_in_the_Desert](https://en.m.wikipedia.org/wiki/Twilight_in_the_Desert)

~~~
Robotbeat
Book was in 2005. Simmons made a bet that oil would be $200/barrel in 2010 and
lost (it was $80 in 2010).

It's almost 15 years ago now. Eventually the Saudis will run out, but this
book failed in its prediction of imminent collapse.

------
Scapeghost
Shouldn't the title be "Are the Saudis lying about their oil production?" or
remove the ?

~~~
Freak_NL
The literal title seems to be:

 _Why The Saudis Are Lying About Their Oil Production_

A question mark makes no sense at the end of a sentence that states a fact.

------
SuoDuanDao
I thought some time ago that the Saudis would likely try to exhaust all their
production without telling anyone, then try to sell of Aramco under the
pretext there was still a lot of oil in the ground. Did not expect them to
sell it so soon.

------
vondur
I remember reading something years ago about how the Saudi's have always over
reported the amount of oil reserves they have and the quality of the crude
oil.

------
xvilka
That will explain recent bold moves by the crown prince in attempts to
modernize and diversify their economy like UAE did. Will it work out? We will
see.

------
Merrill
When you listen to official announcements by government leaders these days,
you have to conclude that Mohammed Saeed al-Sahhaf was ahead of his time.

~~~
zhte415
Reference for Muhammad_Saeed_al-Sahhaf:
[https://en.wikipedia.org/wiki/Muhammad_Saeed_al-
Sahhaf](https://en.wikipedia.org/wiki/Muhammad_Saeed_al-Sahhaf)

The Iraqi Minister for Information during the 2003 invasion of Iraq.

------
dehrmann
> ...Recently it’s occurred to me that [the Saudis] genuinely don’t know
> anything about the oil industry

Or tech. Softbank's vision fund is dumb money.

------
imulligan
Iran knows how to play this game because the Middle East is somewhat
personal....they appear to be a family run oil business. IF we took oil away
from the M.E. equation then it would be void..just saying. This game is slated
to change becasue of the large oil discoveries taking place in Guyana and it
is going to surpass what the Saudi has been touting as their "real
production". Perhaps the USA needs to shift it's focus a little more to the
Americas. Just adding to your comment

~~~
BlueTemplar
Interesting, just how large ?

------
adventured
People certainly love oil related conspiracy theories.

So here's a fun one: the US staged the attack on Saudi oil production. The US
gets to blame Iran, benefit its own growing oil industry (new export pipeline
recently hooked up in the Permian), and harm China (increasingly dependent on
Saudi oil) - all in one neat little package.

I'm not suggesting that scenario is legitimate at all. I'm just surprised that
I've never seen anyone else float it, so far.

~~~
trhway
> the US staged the attack on Saudi oil production.

that is definitely no for so many reasons that there is no point in going over
them. This is why nobody floats it. After all a good conspiracy theory must
have a good theory element in it - ie. a plausible explanation of some facts
without contradicting the rest of the facts :)

What may have happened is US finally decided that it may be the time to stop
the blood bath in Yemen, yet how one would go about it without displeasing the
Saudis? So may be the US just did let the drones pass through (as in the ships
carrying the drones as well as the drones flying to the target). Thus US
preserves Saudis as dear friends, while the Saudis become very interested in
ending the war because their lower back becomes on fire, and how are they
going to do the oil IPO if the oil infrastructure/assets overnight became de-
facto located in the war zone?

