Dhoboi, it depends on a lot of factors. The main upside potential is in the Kurdish areas to the north, and the fields near the Kuwaiti border to the South. The political climate is very erratic, because the US hasn't given up on meddling in Iraq - the neocon ranks seem to be quite powerful and the Obama administration is still playing the old imperial game to keep the lobby at bay. So the outcome over the next few years is a wildcard. I felt all along that, if he survived, Moqtada al Sadr would eventually take over. And this may lead to an atempt by the Kurds to secede. In which case the Turks will invade northern Iraq. And this means northern iraq's production would fall in Turkish hands, there would be a lot of fighting and so on. And with Moqtada al Sadr in charge in the south, then the Ayatollah al Sistani would be in charge, and the Iranians and Iraqis would enjoy a very close relationship. Which leaves the neocon gambit in a shambles.

But this is only one scenario of many scenarios we can paint. And who knows what we don't know. All I do know is our troops are being wasted there. That war was lost the moment we went in, just the same way Viet Nam was lost. And there's nothing we can do it about it. Nor is there anything we SHOULD do about it. The only thing we can do is build a statue of William Kristol and put it in a memorial which says: "This is the guy who got half a million people killed for nothing".

Dohboi, notice that estimated production numbers for Iraq from IEA chart above has little resemblance to the one produced by Stuart Stainford or other pundits who buy into the great Iraqi oil production explosion expected by Iraq. They expect OPEC to be producing 12 million barrels per day by 2015 if the chart below can be believed.

Obviously the IEA does not buy into that propaganda and neither do I. But I do think they could increase their production somewhat but I would guess only about half a million barrels per day by 2015, if that. Anyway their old fields are in decline and all this new oil is supposed to come from infill drilling. I simply do not believe it.

Iraq Could Delay Peak Oil a Decade By Stuart Stainford.

Ron P.

Here is what Peter Wells seems to be banking on (but he does put big question marks). It would push the peak toward the end of the decade.

http://www.neftex.com

A fly in the ointment (petroleum jelly, of course) is the House Of Saud waiting to disintegrate. Further to that is the numerous bunker busters on Diego Garcia waiting to be used on Iran, the pipeline attacks in Iraq, and the anger of the Muslim world in general.

The list is hundreds of examples long and the US has expended its resources on Iraq and Afghanistan. There isn't much left to save the status quo of stand alone conjecture.

The graphs pre-suppose stability and the indications are more likely that some external force is simply ticking away.

My bet is on Saud disintegrating or another terrorist attack to stir up a hornets nest of disrupting action.

http://bittooth.blogspot.com/2009/09/future-of-oil-or-gentle-cough-at-ny...

From Heading Out:

Non-OPEC crude oil production has peaked and is in decline (I used a TOD graph showing the fall since 2004) and so when one looks at countries that have a surplus of production over current supply (comparing IEA and EIA data) the stand-out is Saudi Arabia at either 3.3 or 2.5 mbd (depending on who you believe) with the next largest being the UAE at somewhere between 0.3 and 0.6 mbd.

(And here let me briefly digress to point out that those who wave the NYT story have little clue of the time that it takes between discovery and full field production – nor do they understand oil field depletion, or that just because we have passed peak production does not mean that there is not a whole lot of oil out there that is still waiting to be discovered – only that it is going to be less than the huge volumes that we have already found and exploited).

The problem, as I pointed out, is that the Saudi number includes, among other fields, Manifa, and Yes! we know it is there; Yes! we know that it can produce 1 million bd; but we also have to recognize that until a refinery is built to process that oil (which will not now come on line until after 2013) the use of that production number is a fiction. And thus there is less than 4 mbd available as a current world reserve.

Peter.

This came as something of a surprise to the oil companies, because they really thought they had the capacity.

Ah, here's a favorite discovery of mine from the Google News Archives:

EL PASO, Tex (UPI) - Because of a shrinking energy supply, the state of Texas will allow all oil wells to produce at maximum capacity beginning April 1 - the first "wide open" run of the wells since the Korean War.
"We (the commission) feel this to be an historic occasion - damned historic - and a sad one," said Byron Tunnell, chairman of the Texas Railroad Commission which sets the state's oil allowable.
"Texas oil fields have long been like a reliable old warrior that could rise to the task when needed," Tunnell said. "That old warrior can't rise any more."

The Bulletin - Mar 17, 1972. April 1st, eh?

Not much of a lag to the unleashing of the oil weapon the next year, but this stuff made the news, never mind that no one paid any attention to it. Remember Deffeyes recalling the one line mention of a 100% allowable in some newspaper?

So, is the world "wide open"?

Interesting observation!

The production could be maintained for a while by drilling infill wells and putting in water injection systems to get additional oil out of the fields, but then another factor came into play. The decline rate on the wells became steeper as they were produced at higher rates, so it turned into a self-defeating exercise in the long term.

Yes and that is exactly what is happening right now all over the world, not just with OPEC but with Russia and everyone else. Saudi has even stated such. From 2006:
Saudi Arabia’s Strategic Energy Imitative

• Without “maintain potential” drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

That is crystal clear. Their tired old fields were declining by an average of 8 percent per year but with massive infield drilling of horizontal and MRC wells, they got their decline rate down to almost 2 percent. But the decline will come fast and furious when the water hits those horizontal wells.

And to use your words, eventually the ugly truth will become obvious.

Ron P.

Therefore the OPEC demand forecast basically implies that the world economy will not grow at all in the second half of 2010.

From 2004 to 2008 world GDP growth was about 5% per year, with almost flat oil consumption. German and Japanese consumption was falling, while German GDP growth continued, and Japanese GDP was flat.

I don't see flat oil consumption as a predictor of flat GDP.

These is my latest OPEC crude oil graph (up to April 2010)

The other graphs are here:
http://www.crudeoilpeak.com/?page_id=51

And on Saudi Arabia:

12/7/2010
Saudi King ordered oil exploration to cease. But will it matter?
http://www.crudeoilpeak.com/?p=1710

Excellent summary.

The KSA has recently made a series of statements about its reserve capacity from 2015 to 2020 (which I can't post due to copyright laws). While the statements were somewhat vague, they implied that as soon as 2012 they would have to start work on increasing 'capacity' due to depletion of older fields. Also from 2015 to 2020 a major financial investment would be required to maintain 'capacity'. The plan until 2020 includes development of known discoveries, with exploration of new oil fields locations basically halted - as we recently discussed,

It does not seem that they want to make the computation of potential loss of capacity very easy to compute, as they are still developing/reworking other fields until also about 2012. But relying upon statements just made by KSA, and not any speculation on my part, they are basically stating that capacity diminishes quite fast and that the only way to maintain such capacity requires major investment. So I am concluding that the 900,000 bpd they expect to bring online in the next two years to be about roughly equal to overall depletion in the same time period - therefore capacity will not be increasing now or in the future.

The thing that occurs to me is that the reason production may be down is because the production that was removed does not make economic sense at today's prices.

Suppose Saudi Arabia has some production that it needs to have oil prices to be at the equivalent of $110 barrel to make money on. Saudi Arabia won't tell the world that. Instead, it tells the world that it is holding back production, to keep prices up. (But it is really holding back production, because it figures, if if it wants to make money on it, there is no point in producing it now.) So the production may be back, if the price is high enough.

Or there could be other issues as well. Perhaps temporary production was being added, that couldn't be sustained. A drop in price would be a good reason to take it off line.

Russia's crude oil production is close to flat in recent years with a small upward slope.

Regarding future production, I have read that Russia (like a lot of other countries) is thinking about raising taxes on oil companies. Higher taxes will make production at a given oil price less profitable, so I expect that marginally profitable fields will be taken off line, reducing production. I expect this to happen around the world, pretty much where ever taxes are raised. So I think it is quite possible that production will decline in Russia, and in other countries that decide to raise taxes on oil companies.

I expect another factor affecting future production / consumption (around the world, but in Russia too) is the degree to which the economy falls back into recession. Many countries realize that they need higher taxes on consumers to make up for tax shortfalls with their stimulus programs. The problem is that these tax increases on consumers will tend to reduce spendable income for consumers. This will tend to reduce discretionary spending, and is likely to lead to further recession. Recession will tend to reduced demand, and force oil prices lower. With lower prices, oil producers will have less incentive to produce, and this will further reinforce declining production.

This is a little chart I put together recently of crude and condensate production, using the latest EIA data from International Petroleum Monthly.

As you can see, while Russian production is rising, it is "nothing to write home about". It is more that Saudi Arabian production has fallen. It may be that on another basis (including natural gas liquids, for example), Saudi Arabia would have been ahead of Russia at some point. But mostly, I think Saudi Arabia is ahead of Russia in exports, since it has fewer people.

World production is pretty close to flat, with 2010 YTD close to 2008 levels.

The economy is not based mainly on "the market", where many buyers and sellers openly buy and sell standardized products for publicly disclosed prices.

The economy is mostly based on "the deal", where buyers and sellers with asymmetric access to information and resources get together and attempt to take advantage of each other in private.

This 60 Minutes investigation put forth the notion that the run up to the $150 a barrel price was the result of another Wall Street Ponzi type scheme. They discovered that the futures markets were 27 times the size of the physical supply actually being delivered. Wall Street traders were driving the price, not supply and demand.

I don't understand how this could be true. In my opinion it's always supply and demand that determine oil prices. How can it be otherwise? The speculators simply bet between themselves what future oil prices will be. How does this effect the price of real oil being bought or sold? The Saudis or any other producers can easily bypass the futures market and sell directly to refineries, and this is what determines the price of oil.

There is somewhat of an analogy between the 2008 oil price spike and the 1980 gold price spike up to $800/oz. In both cases the speculative market 'jumped the gun' so to speak in driving the price spike. The spike was followed by a crash and then, over the longer term, a slower rise back to the earlier speculative levels, possibly supported by real fundamentals. I still expect oil will rise at least to $100 or so, possibly not to $140+ level it achieved in the spike.

EDIT: Actually, silver is probably a better example in that it is a consumable as well as a precious metal bought for investment (speculative) purposes. And it has only climbed back to about 1/2 the level of the 1980 spike, just as oil has come back up to about 1/2 of the big spike.

Futures markets don't really dictate oil prices. They're mostly like the canary in the coal mine. They tell you what's in the air.

Other than that, they're just the average trader's guess on where the market is going. If you're a lot smarter than they are, you can beat their guess, but most likely they're a lot smarter than you are.

Secret exploration is the way any sensible oil company would do things. The local governments don't like it, so they force disclosure after a period of time to encourage production. When you drill you are in a race to get results, lease more property, and then start production.
They know what they are doing.

There is no evidence for a dip in 2009 as shown above. Can anyone explain that??

The data I used in my chart above is from OPEC's own Monthly Oil Market Report. I track the data every month and put it into my spreadsheet.

Of course the EIA data shows the exact same dip as does OPEC's own data.

OPEC yearly production in thousands of barrels per day. EIA C+C from the International Petroleum Monthly.

2005  31,871
2006  31,591
2007  31,210
2008  32,483
2009  30,639
2010  31,087

That is a year over year drop of 1,844,000 barrels per day.

But the drop becomes even more pronounced when you plot the monthly data. In July of 2008 OPEC, according to the EIA, produced 33,138,000 barrels per day. In February of 2009 their production had dropped to 30,223,000, a drop of almost three million barrels per day. OPEC's own data, according to secondary sources, showed almost the exact same percentage drop.

Yes, there is hard evidence for the dip shown above for 2009. It is just that the monthly data accentuates the drop.

Ron P.

Why would they increase production when all it could do is hurt the bottom line?

Oil production worldwide flatlined in late 04 into an undulating plateau for several years moving forward. Oil supply did not increase while the price kept rising towards a peak of 147 in July 08.

So, are you saying then that OPEC could have produced more during those years as the price kept rising, but they were somehow knowledgable about the impending drop in price that would take place in July 08, and thus kept production steady? So, you're saying that instead of taking advantage of selling their product for over a hundred dollars a barrel, which was a price unprecedented in the history of the oil pit, they instead sat on spare capacity knowing some day in some year hence the price would drop?

Hypothetically, if I had a warehouse filled with widgets that I sold in the 90's for $20-30, but later when they are selling for over a 100, I just sit on the spare capacity production, with every other worldwide competitor also doing the same thing? That isn't the way business works. They tend to get as much as they can for their product.

In fact, if you remember, when oil was over a hundred a barrel, Bush jr. went to Saudia Arabia to beg on concerned knee for them to raise production, and was told they couldn't help out. Which either means they were unable to accomodate, or (your scenario: They held production steady, knowing somehow the price of oil would drop at some point, and best not to have too much product on the market when that finally does occur.)

Figure 1 in this guest post is where the rubber meets the road. It shows graphically that when opportunity struck opec waived it off, clearly indicating they didn't have the spare capacity claimed.

The huge question is, WHY DIDN'T KSA DO IT THIS TIME?

My guess is they just didn't have the excess capacity.

Exactly, when Bush jr. begged the KSA on behalf of the US economy for the usual raising of production to stabilize pricing, he was rebuffed. And that's when anyone following said events should have had enough information to realize KSA was no longer the swing producer they historically had been. The only poster on this thread that seems to think differently and with determined conviction, is roflwaffle. We shall see if his position is later proven accurate or completely erroneous.

Well, that's OPEC's story. It's not the one I buy into.

As the 1973 embargo demonstrated, KSA and the rest of OPEC have already had the ability to permanently raise the price of worldwide oil since the early 1970s. So what changed in 2008?