The peak of monthly production was in July 2008. The trough in the depths of the global recession depends on which series one looks at, but I have been examining the recovery from May 2009 onward. And at this point, the latest figures show us about 1.3mbd to 1.4mbd (mbd = millions of barrels/day) away from reaching the July 2008 peak again.
A few days back, I analyzed the composition of the recovery from May 2009 to the most recent figures (based on IEA OMR data). That showed the recovery coming from a variety of countries, but with two-thirds of it coming from non-OPEC countries, and only about 0.7mbd coming from OPEC:
This morning, I looked correspondingly at the composition of the decline from July 2008 to May 2009:
As you can see, in contrast to the recovery composition, the decline came almost entirely from OPEC's voluntary cutback in the fall of 2008, with about 3.3mbd of reduction from OPEC, and less than 0.2mbd of reduction in non-OPEC production.
Given that OPEC has only restored about 0.7 out of 3.3mbd of cutbacks, about 2.6mbd of previously demonstrated capacity remains unused. This is about twice as large as the 1.3mbd or so distance from where production is now to the July 2008 peak level.
Therefore, if the global economic recovery continues, and in particular if OPEC is willing to restore their production cuts at prices that don't derail that recovery, then it appears likely that the July 2008 liquid fuel production level will be exceeded.
This is true even if one assumes nothing about Iraqi production increases.
5 comments:
Stuart, me thinks this reasoning will be put to the test theses days, as we crossed the barrel price of 85$...which quite a few people say is the limit from where "the recovery" will be negatively affected by the oil price. So either OPEC (well, the Saudis and the oilbank) can actually keep the oil price in check, or there is nothing behind "spare capacity". Interesting.
My guess is that the market feels it's once again pushing against a pretty firm ceiling for non-OPEC production. So, it's all up to the swingers to set the price.
Using the most complete data available from JODI I have 3819.34 kb/d recovery in Oct 2009: 63665.97 kb/d, up from a Nov 08 trough of 59846.62 kb/d. This leaves out Iraq/Venezuela/South Africa/Russian Federation/Singapore, who have incomplete data sets - this last four still haven't reported Nov 08! - and assorted small fry consumers.
How does that jibe with 2.2 mb/d of production recovery? Some seasonal adjustment would be in order, for instance Iran/KSA/Iraq piled on 714 kb/d by June 09 to power their A/C, which they subsequently turned off, but still...also there is the gap between Liquids and C+C; NGLs might as well be Bubble Up for all a motorist cares. C+C is now only 85.67% of Liquids.
On a slightly more applicable note, the US added 136 kb/d of Ethanol for 2009.
The problem, as always, is this is an opaque market where the fundamental data is not properly transmitted, its lots of secrets and gaming. No real surprise either, on the other side of the equation, the gold and stock markets are heavily manipulated, with lots of smoking guns....
(For starters, a god place for research on stocks and gold manipulation: Zero Hedge)
Stuart
On the one hand I think you're correct. Within the next few months a new high will be close in nominal terms (nominal=gross energy)
On the other hand, we are still technically on a (limited) plateau. If we do make a nominal high it won't change our overall situation much. (And it will have happened due to massive unsustainable increase in debt)
Nate
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