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Oil supplies are not expected to go up with Mexicio and Russia's aging fields crimping production, non opec production barely budging with 1% increase this year according to IEA. Indonesia production down by half from its peak. Countries in the middle east like Iran are consuming more and have less available for export. And the Saudis plan to build huge chemical aluminium and other plants as well as cities in the desert, and increase electricity production. This will take up some of the oil production and make less available for export. Militant strikes have shut down over 25% of production of Nigeria's 2.5 million barrels a day of production repeatedly in the last few years. And Saudi Arabia has according to CERA only 2 million barrels a day of spare capacity or 2.3% that it can add, all of the safety cushion in one country according to Daniel Yergin. Yergin sees prices up to $150 barrel based on the supply constraints. The demand side is showing declining consumption in the USA but not by enough to compensate for growing consumption in China by 5% this year, and the increase in consumption in India, Russia, Brazil and other developing countries including Middle East. The reason for continuing consumption increases in the rest of the world is that price impact has been less severe in Europe because of the strong euro and oil priced in US dollars, and in China because Petrochina is required to put price caps so gasoline price increases are not that harsh. And India also cushions the price impact to some extent to protect consumers. And autos are just taking off in large numbers in China, Russia, India, Brazil and other countries. The drop in consumption in the USA has to be large enough to have an impact. And the shift to fuel efficient targets in the new fuel efficiency regulations in the USA are too modest and over a number of years to have any impact in the short term or in the next 1-3 years. In February US oil demand dropped to 19.7 million barrels a day, down 1 million barrels a day from the US average for 2007, but this insufficient conservation to impact price. Even though new cars are shifting to higher fuel efficient small cars the impact on the total fleet is gradual as cars on the road purchased in the last 5-10 years are still on the road. Even as the consumption falls in the US the offset is occurring in the other countries like China, Russia and India. Some of this is due to the euro and some to speculation but the supply constraints are real and demand momentum is still there in China, Middle east, Russia and India to keep offsetting savings elsewhere and keeping supplies tight. The euro increased in value by 2% while oil prices increased by 10% since the 1st week of April so there is more than the weakening dollar and some speculation to this surge, which may be why the normally cautious Yergin says the price rise to $150 is realistic and says, its not just that the genie is out of the bottle, a hundred genies are out of the bottle. That is to say for the immediate future of demand momentum and supply sluggishness which could run 6-24 months, to the Olympics and maybe a year or so from then. This ties in with the thinking behind the Goldman's estimate and CERA's estimate. ...

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The Gulf economies are not managing their wealth that much better this time. There is more money in the hands of private companies compared to the last boom but the investments in Saudi Arabia to create 6 or 7 cities in the desert and the huge construction boom pose questions about what is the best way to allocate capital for countries like Saudi Arabia, which have larger population than some Abu Dhabi or Dubai for instance. Are many aluminium plants and other similiar investments and building cities in the desert the best way to allocate capital resources to provide for the needs of a growing population in Saudi Arabia, especially as high prices of oil may not last more than a couple of years if conservation and energy efficiency really take hold and there is a global softening in growth after the rapid pace of the last decade? Interestingly some of the wealth that is being spread through imported labor to neighboring countries is not doing enough because of the Gulf countries exchange rate with the US dollar and the link to US monetary policies which create looser monetary policy just when inflation is picking up. With higher inflation and the fixed exchange rates of Gulf countries the inflation eats into the sm all earnings of foreign labor from South Asian countries and elewhere and money repatriated home brings less rupees or home currencies. In addition to all the waste and these distortions in the way wealth is shared with neighboring countries who send in labor, there is also the way this creates distortions in global finance. Mentioned here is the example of how in the last boom in petro economies of the Gulf the recycled petrodollars were loaned out to niave latin american borrowers whose countries borrowed more capital than they could possibly absorb or afford and ended up with a lost decade of growth when it became impossible to support so much overseas debt. The current boom for oil producing countries is already being cited as the cause of the huge global liquidity, that made for the availbility of cheap capital and kept interest rates too low for too long, leading to too much risk taking and taking on off too much debt by homeowners and companies in the USA. ...

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Sanger, Erlanger and Rudoren describe in detail the differing interests of Congress, the Obama administration, the Iranian hardliners around Khamanei, the Israelis, the Europeans, and the Russians each quietly pushing its own interests. Beyond the physics of a deal, a Republican Congress, Democrat Obama and Iranian hardliner Khamanei, each are trying to get their own narrative to look right with public opinion they face, that they have not backed down. The Israelis find any deal unacceptable and reject even a small lifting of sanctions, because of the "existential" threat. Add to this Sunni Saudi Arabia which says it will match Shiite Iranian capabilities with their own uranium enrichment facilities if Iran is allowed to retain capabilities. And economic interests also figure into this- Russian interest is in keeping Iranian oil off the market as long as possible so that oil prices do not fall further in 2015, which means delay an agreement as long as possible. The French see the Obama administration as likely to give too much away for an agreement and want tougher terms....

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Saudi price cut in November 2014 to reverse market share decline in the U.S. The Saudi share of total U.S. oil consumption declined to 4.6% in August 2014 from 7% in August 2013, according to EIA. This brought NYMEX price to below $80 in early Nov. 2014.

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Important year end reveiw of the oil price forecasting work of so many anlaysts and where they failed . The IEA and the US Enery Dpt forecast have year after year underestimated this pirce by over 20%. Analysts change the price forecasts within a couple of weeks based on changing information and assumptions. Of all this the Saudi Arabian forecasts have ben within 12 % of what has actually ocurred according to a study by Ronald Berger Strategy Consultants of Muich, Germany. And whats their forecast for 2008. By extrapolating from the Saudi budget and the assumptions, used such as giving a wide margin to avoid a deficit in the budget if oil prices undershot by a wide margin, one gets $75 for US benchmark crude. Forecast by experts are in the neighborhood of $80 average for the whole year 2008. Goldman recently revised theirs upwards from $85 average for 2008 to $95 within a 4 week period. How good is the Goldman forecast. No one really knows. Lehman has a forecast of $84 average for 2008 and bases it on the opacity of the market because no one knows what OPEC will do with supply and China does not provide good information on demand. So basically anlysts are adding an uncertainty premium to the price of oil. And this is especially so because as the Chief Economist at IEA says global space capacity is so thin and any event can influence price. Last year the rhetoric about Irans nuclear intentions was enough to stir up the price, as were other smaller events disrupting supplies. But the Iranian situation has since cooled down and diplomatic solutions are in the works. So what to expect in 2008 in the way of political uncertainty. Iraq, Iran, Palestine, Lebanon have all seen a cool off in the ast couple of years and the Bush administration rhetoric has become outmoded as has other rhetoric from Iran so that does'nt look like it will stir up oil prices in 2008. Still there will be some uncertainty premium about supply from OPEC and demand from China and India. And demand from the Middle Eastern oil producing countries themselves as well as the increasing demand in India and China will mean that lower demand in the US because of a recession will still mean an increase in global demand over 2007 of 1.5 million barrrels a day over 2007's 85 million barrels a day. What will change the dynamics of this situation is the government mandated fuel economy for all vehicles on the road with Europe more aggressive in this area under the pressures of global warming. If this impacts India, China and Russia as these fuel saving technologies are transferrred there overall consumption should see an impact. Europe's targets are only 4 years away for 2012. And the environment may cause China to bring in newer technologies that both contribute to improving environment and conserving energy. Because China's environmental record is almost catastrophic one could see some of this happen much sooner than expected after the Olympics in 2008. All that might change the way the world looks at oil and its use, and all energy sources and their use. ...

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What oil analysts would like to know about the Khurais oil field in Saudi Arabia is can it deliver. This is the Saudis big effort to sustain and increase oil production as other fields are aging and declining. The Saudis would like to see it add 1.2 million barrels a day to its current production of 11 million barrels a day. no date is set for when this oil field will come on stream and how much of the 1.2 million barrels a day will become reality. The Khurais field has been sitting there for many years while the Saudis tapped the Ghawar field just 60 miles away because of the complexity of the Ghawar field which situated deep within the rocky layers of the earth and dunes. Its been described as a hard sponge compared to the wet sponge that Ghawar is. The natural pressure is not enough to bring the oil up so natural gas or filtered salt water would have to be used. As natural gas is needed for soaring power generation needs filtered salt water will be brought from over 120 miles away from the Persian Gulf through pipes to Khurais and more than 100 injection wells have to be drilled so that 2.3 million barrels a day can be pumped down in a manner that would push the oil up but not kill an oil wellby going through a rocky fissure. All this has to understood through geologic mapping of 2700 square miles down to the microdetail for an area the size of Connecticut so that nothing goes wrong. 2.8 million 3-dimensional images of underground strata to trace any fractures in the rock that might cause trouble and building of models to simulate how the oil field may respond to water injection. The production would have to be monitored from Dhawan where the central monitoring facilites are for Aramco. Aramco the Saudi Oil company brought in for oil field services Foster Wheeler as project manager, Halliburton for drilling wells, Eni SpA's Saipem unit for water injection work, in the plan developed in 2005 with estimated cost of $6 billion. Halliburton is drilling more than 300 wells that go over a mile deep and then branch out horizontally, and 125 water injection wells. Nansen Saleri who heade reservoir management for Aramco and headed the Khurais revitalization effort is now running his own firm in Houston. He described it - the trick is to understand Khurais down to the smallest detail. This is a picture of the complexity and the resulting uncertainties of Khurais. A former head of Aramco oil exploration Mr. Husseini who retired 5 years ago says its quite possible that Aramco may achieve its target of 1.2 million barrels a day but isn't sure that production can be sustained at this level and what it might cost. Khuransiyah project was expected to generate half million barrels a day by 2007 en but is a year off schedule and many projects are running late from a shortage of steel and manpower. It used to cost $4000 to add one barrel of capacity through the 1990's now its estimated by experts to cost closer to $16,000 for a barrel added. So when will Khurais come on stream? And will the even more difficult Manifa field in the Persian Gulf come onstream? Its not certain. meantime oil reached 119 dollars a barrel. But analysts will be sure to watch this one and the new fields in Brazilian offshore waters to bring prices down just as conservation kicks in and global demand slips a bit from the super heated growth of the last few years especially from Asia. ...

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Karen Elliott House, Pulitzer prize winning journalist and expert reporting from Saudi Arabia, in 2007. You can follow her reports in the Elliott House group and link.

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Prince Mohammed bin Salman, son of the Saudi king Salman, oversees economic policy. He says stock sales of 5% of Saudi Aramco will be used to create a sovereign wealth fund of about $2 trillion that would help create the jobs with income from overseas investments and projects at home. About three times the jobs created in 2003-2013 will be needed with the demographic changes, according to McKinsey consultants. This will act as a diversification away from oil income dependence.

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Michael Birnbaum, the Post, Moscow bureau chief talks to experts and politicians in Moscow about the economic situation as the ruble declines by 36% since July, with the fall in oil prices accelerating its fall and reducing the impact of central bank intervention in slowing the decline. He cites a Putin interview with Tass news agency in Nov. which he says a tieup is possible between the U.S. and Saudi Arabia to bring down oil prices as a way to strengthen the effect of sanctions in changing Russian policy. Russian Finance minister Anton Siluanov says lost oil revenue impact is about $90 to $100 billion a year, added to the cost of sanctions at $40 billion. Significant capital flight also adds to the overall cost. Russian companies borrowing in dollars have large debt payments due that will need to be supported by the Russian government, an added cost. This will put the Russian economy in recession in 2015. The central bank expects inflaion at 10% in 2015. Large losses of this magnitude will be harder to sustain and deplete international reserves of $429 billion as of Oct. 2014. The thinking of ordinary Russians is reflected in an independent Levada Center opinion poll showing 61% of Russians expecting a decline in living standards and economic crisis in the near future. The man most responsible for stabilizing Russia's finances, former finance minister Alexei Kudrin, who had profound public disagreements with president Medvedev over increases in the military budget, warned of an economic crisis following the parliamentary and presidential elections. A major weakness of the Putin-Medvedev second and third terms is the failure to use higher oil revenues to expand the tech sector and other industries to diversify Russian exports away from oil. ...

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With domestic oil consumption growing at 10% a year, and the Arab Spring leading to increased subsidies and social spending, the Saudis are looking at nuclear power to generate some of the supply of electricity. Saudi Arabia expects to have no reserve margin of supplies by 2020 at current levels of domestic consumption. In 2011 the Saudi government setup the King Abdullah City for Atomic and Renewable Energy, or KA-CARE, for coming up with nuclear energy policies. KA-CARE has an agreement with French supplier AREVA.

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The International Energy Agency sees a shortfall of 12.5 million barrels a day when it compares the needed 37.5 million barrels a day by 2015 with the planned supply increases showing 25 million barrels a day. A lot depends on the assumptions and what the 37.5 million barrels a day is based on. Does it account for a slowdown in the world economy and a drive for fuel efficiency and conservation habits by 2015? How much of this is reflected in the numbers? And on the planned increases of 25 million barrels a day- does it account for increases that may be planned in 2009 and 2010 in response to prices above $150 a barrrel which is expected? The IEA has a team of 25 analysts working on the forecasts but it gets no cooperation from Saudi Arabia about its individual fields production, and Venezuela, Iran and China also keep their information a secret. This makes supply forecasting a difficult business. IEA uses IHS Inc a data provider, USA Geologic Survey, oil and service companies information and national petroleum councilds information....

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Fears that the conflict in Syria might spill over and lead to a conflict with Iran pushed up oil prices. At the same time the new forecast by the International Energy Agency in early August 2012 showing a 20% decrease in demand growth in 2013, as a result of the economic slowdown in the U.S., Europe and China, acted to put a lid on oil price increases. Light sweet crude for September delivery was at $92.87 a barrel on the New York Mercantile Exchange on August 10, 2012, and Brent crude was at $112.95 a barrel on the Intercontinental Exchange.

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Al-Naimi Saudi Oil Minister talks about OPEC and the current oil supply situation while taking a walk in Vienna, where OPEC headquarters are located. Naimi says OPEC is a business organization, not a political organization. He says OPEC operates more like a de-politicized business organization. Yasser ElGuindi of Global Medley Advisors says OPEC's goal is to get the maximum price it can to meet the budgetary needs and investment plans of the countries and keep their economies growing, while at the same time making certain that demand is growing in the rest of the world. The Saudis believe that price is between $50-60. The Saudis play a critical role in keeping price in the $50-60 range, with less chance of a price decline as demand is steady and not likely to drop.

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On June 30, 2008, oil prices hit an high of $140. Because of the opaqueness of the oil futures markets that help set the price of oil, very little is known about the different players in that market. Because of increasing demands for public scrutiny of such spikes in the market and its effect on the economy, the CFTC has released information about the players in oil trading and futures markets. This list for the period when the prices reached $140 in June 2008 include banks, hedge funds, sovereign wealth funds, pension funds, private investment arms of wealthy individuals, and airlines. Investments related to million barrels of oil were made by 219 investors. The banks include: Goldman Sachs and Morgan Stanley which have played a role in oil markets for a long time. BP and Delta Air Lines as users of oil products. It includes Yale University endowment fund, Singapore's government, hedge funds Brevan Howard and D.E. Shaw & Co., pension funds for Texas teachers, Cascade Investment LLC (the investment firm of Bill Gates), and the Danish pension fund ATP....

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Energy Aspects, London based consultancy, estimates non-OPEC production declines of 700,000 barrels a day, up from previous forecasts of 200,000-300,000 barrels a day. Demand is expected to be higher than supply by June 2016, and drawing down inventory from that time. Agreement to freeze production is uncertain at a Doha meeting of OPEC countries, with Iran planning to increase production from 3.1 million barrels a day currently to 4 million barrels a day. Saudis increased production to 10 million barrels a day in 2015, and Iran is determined to increase its production to the higher level. The price of U.S. oil rebounded to $42.17 by April 2016.

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Saudi Arabia's strategic moves at the OPE pricing meeting in Nov. 2014. Saudis push for keeping the production levels as they are, not making any cuts. Analysts say the Saudis are aware other OPEC countries and other producers outside OPEC such as Russia, are not likely to make cuts in production as they face severe budget constraints- especially Venezuela, Iran, Russia. In this situation they have decided to take a wait and see approach to see where prices are headed in coming months. A price of $60 for Brent crude is likely to lead to cuts, according to some analysts.

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How much is the drop in sales of light trucks, including truck based SUV's? Acttually not much so far, title is misleading! 2004- 55.7% of total vehicle sales 2005- 54.9% of total vehicle sales 2006 1st quarter- 53.8 % of total vehicle sales source: Autodata, NYT cite For GM in April 2006 situation according to GM figures Overall Light Truck sales up 1.5% Escalade up 127% Tahoe up 30% Overall GM down 7.3% in all vehicle sales in April source Ward's AutoInfo Bank But the mix weighted toward the Escalade, Tahoe, and new SUV's which are non-incentive and priced to meet demand, which mean higher profits to make up for lost volume in cars. This is occurring in the middle of bigger changes, and as GM moves to introduction of more fuel efficient cars with better quality and appeal to younger demographics. GM is restructuring to transform itself into a global company with growing Asian sales and shifting volumes overseas. It is shifting employee and capital base to more countries overseas to create new opportunities and make GM a new and different company, a global company. Incentives pay part of the gas price for buyers, and more fuel efficient SUV's also chip in to pay gas costs. Americans are not out to get off the SUV's just yet, as fuel effficiency standards go up.The investments oil companies are making are expected to provide a payoff in increased production by 2008-2009, and the new oil policy of Saudi Arabia kicks in (see Naimi at CSIS 2006 meeting). The situation eases up for families accustomed to carrying kids around or hauling stuff around. See also links to Tradin Frenzy (Mouawad, NYT, 4/29/06) speculators in oil markets cause 10-20% of price rise, could lead to drops later after ethanol part of spike eases, and if global demand drops with economies cooling off a bit. ...

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OPEC fails to agree on increasing production quotas at its meeting in June 2011. Iran, Venezuela, Ecuador, and a number of other countries which have very little spare capacity were against increasing the quotas. The Saudis, the UAE, Kuwait argued for an increase because of increasing demand and disruptions in the supply from Libya and other parts of the Middle East. The Saudi oil minister described this as the most difficult OPEC meeting he has attended. Analysts expect the Saudis to increase production in the absence of an OPEC agreement.

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A plan appears to have been put in place by the U.S. and the European Union countries to strengthen the American position in negotiations with Iran underway in Istanbul. The impact on oil prices and on U.S. and E.U. growth as a consequence of higher oil prices, especially when the eurozone countries faced lowed growth, was one of the ways Iran hope to blunt the tightening of sanctions against Iran's nuclear program. It now appears from information released by the International Energy Agency that a plan was implemented by the Saudis in recent months to build up reserve supplies. At the same time a similiar effort was being implemented to increase production in Iraq and Libya so that it would add to reserves added by the Saudis. Daily output from OPEC countries increased by about 1.4 millon barrels in the Sept 2011- March 2012 period, as the confrontation with Iran took shape with increasing pressure using sanctions on Iranian oil, according to the IEA. Of this 1.4 million barrels a day increase, one third is from the Saudis and the rest from Iraq and Libya, according to IEA. In March 2012, OPEC oil production increased by 135,000 barrels a day to 31.4 million barrels, mostly from higher output in Iraq. The Saudis have filled up domestic oil inventories and placed an additional 10 million barrels of oil in storage close to markets in Europe and Japan. This suggests that this was part of a quietly implemented plan in cooperation with the U.S. and the EU countries to increase the effectiveness of sanctions and protect global oil supplies from disruptions; even as the U.S. pressured Japan, S. Korea, India and other countries to reduce purchases of Iranian oil. The economies of India, the EU and other countries were already beginning to feel the impact of higher oil prices in the 1st quarter of 2012....