March 9, 2011
Saudia Arabia reserves overstated by 40pc
Jeff Currie, the bank's oil guru, said Saudi output had quietly crept up by 700,000 barrels a day (bpd) even before the Libyan supply shock.
Assumptions that OPEC has added 1.9m bpd over the last two years are wishful thinking. These new fields have been "largely offset" by attrition in old fields.
"We believe that OPEC spare capacity has already dropped below 2m bpd. The question therefore arises how much spare capacity is left to absorb potential supply disruptions in other countries," he said.
If this picture is broadly correct, spare capacity is already close to the wafer-thin levels that led to wild price moves in mid-2008.
Chris Skrebowski, editor of Petroleum Review, said the long-denied oil crunch is starting to bite. "We cling to the comfort blanket that spare capacity exists, but it is mostly fictional, or inoperable. If you take 2m bpd off the figure, the whole dynamic of global oil supply changes," he said.
A Wikileaks cable cited a Saudi geologist claiming that the kingdom's reserves had been overstated by 40pc. A second cable questioned whether the Saudis "any longer have the power to drive prices down for a prolonged period".
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