Saudi oil reserves may be overstated by 40%

By Ian Wyatt: Oil prices are down.Since March, the price of West Texas Intermediate Crude (WTIC) has fallen roughly 16% to around $91 per barrel. There are a few factors behind the price decline. Stagnant economic growth, reduced demand, and high inventory levels lead the list.

If an embargo is successful in preventing Iran from selling a significant amount of oil on the world market, what would replace it? On Friday the White House released the following statement:

Venezuela has surpassed Saudi Arabia to become the nation with the largest proven crude oil reserves in the world, at 297 billion barrels, Oil Minister Rafael Ramirez said Wednesday."At the end of 2010 we had a level of 217 billion barrels of oil, and right now at the start of this year we can certify 297 billion barrels," the minister said at a press conference.Saudi Arabia, long the world's top producer and exporter of crude, has some 266 billion barrels of oil, according to the Organization of the Petroleum Exporting Countries.

Fracking isn’t just for shale. In Russia, producers are importing techniques from the U.S. to squeeze billions of dollars of extra oil from Soviet-era fields. TNK-BP, Russia’s third-largest producer, will use hydraulic fracturing combined with horizontal drilling in almost half the wells it sinks this year, a sixfold increase in just two years, the company said. OAO Rosneft, OAO Lukoil and OAO Gazprom Neft have similar plans.

One of the key questions in assessing the effect of the Libyan conflict on world oil prices was the extent to which an increase in Saudi production would offset some of the lost output from Libya. Now we know the answer, and it's not reassuring. Back on Feb 25, Reuters reported what sounded like some favorable indications:

Brian Rezny submits: A sixth World Cup win eluded Brazil this year. But there are still things to celebrate: the day Brazil faced World Cup elimination, GM’s South America chief said that he expects the country’s auto sales to increase 68% by 2014, as “Brazilians are getting richer and the currency stronger”. And the central bank expects GDP growth of 7.3% this year (the fastest pace in over 20 years, according to Bloomberg).

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.This post is a guest contribution by Dian Chu, market analyst, trader and author of the EconForecast blog.