Pursuant to Friday's decision to use Brent prices henceforth, I wanted to take the standard graphs of oil supply that I post each month - at least the ones that incorporate price information - and post versions of them with each price series to better understand the shift that I am making. Above is the graph of production since 2002 with inflation-adjusted Brent prices on the right hand scale and below is the same thing with WTI prices:
As you can see, the main difference is that the price peak associated with the Arab Spring is bigger in Brent terms, and has not fallen as far since. This reflects the widening WTI-Brent spread over the last 12 months.
Similarly, here is the new Brent-based price production scatter-plot:
And here is the old one based on WTI:
Again, the big difference is that the 2010-2011 price spike looks more like the 2005-2008 one when viewed in Brent terms.
Henceforth, I will be using only the Brent-based ones.
Hi Stuart:
ReplyDeleteI also chart the monthly supply data from the IEA and EIA but separately. What I find very interesting is to plot the projected quarterly demand from these two agencies out to 2012. The projected gap between supply and demand is quite surprising. The demand data provides some insight into what these two agencies think will happen over the next year. It is this gap and the drawdown of world inventories that will continue to pressure oil prices.
I am wondering whether you could add in the projected demand for 2011 and 2012 to your charts. I think that your readers would be surprised to see them and help them understand the tight situation that we are heading into.
I also also track non-OPEC supply. It shows the difficulties that non-OPEC suppliers are having in increasing their production and that OPEC is now in control of prices, as long as their spare capacity can fill the gap.