Wednesday, October 12, 2011

September Oil Production


The two agencies that report earliest, OPEC and the IEA, are out with their estimates of total liquid fuel production in September.  The IEA says it went down a little and OPEC says it went up a bit more than the IEA says down.  So the average is up, but I'm not sure you should rely too heavily on that fact just yet.  We'll see what subsequent months bring with both revisions to this data point and further data points.  In any case, the data since 2008 are above, and since 2002, along with WTI spot prices, are here:


The price/production curve continues more or less in the same band:


I'm wondering about switching these graphs to be based on Brent rather than WTI prices, given the huge spreads between the two these days, and thinking that Brent is a better indicator of global prices - thoughts?
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7 comments:

  1. AnonymousOctober 12, 2011 at 6:34 AM

    I think that WTI is artificially low, for reasons that are structural (pipelines) and forced (perhaps market manipulation). Since Brent more closely matches what the world spot buyer pays, you should use Brent.

    Question: does a swing producer receive Brent or WTI? If Brent, then the production price signals must be tied to Brent.

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  2. Stuart StanifordOctober 12, 2011 at 7:14 AM

    Joseph - Saudi Arabian grades have their own prices that generally trade at a discount to light sweet oil since they are sourer. The discount is variable but I would guess they are a lot closer to Brent than WTI at the moment - worth a blog post to investigate probably.

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  3. rjsOctober 12, 2011 at 7:28 AM

    re: thinking that Brent is a better indicator of global prices -

    it's a point i've been making on macro blogs that quote WTI out of habit...for the most part, US coast refineries are using brent...

    i've also seen crude from nigeria & indonesia quoted higher than brent; for instance, here:

    http://www.bloomberg.com/news/2011-01-21/opec-pressured-to-lift-output-as-africa-asia-oil-at-100-energy-markets.html

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  4. kjmclarkOctober 12, 2011 at 8:19 AM

    I'd vote for Brent. I can't understand why the US press is still interested in WTI. It seems like a historic artifact, reported in the US for nationalistic reasons. It's frustrating to have people constantly say they can't understand high gas prices when oil prices are under $100 a barrel - except that it's just WTI that's under $100, and the gas prices are tracking Brent much more closely.

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  5. DonOctober 12, 2011 at 9:25 AM

    If one compares at least one year of WEEKLY bar charts, RB (gasoline), HO (heating oil) and CB (Brent), are virtually identical. CL (WTI) may as well be a different commodity altogether...

    CB
    http://www.livecharts.co.uk/LongTerm/brent_crude_oil_chart.php

    the other three
    http://futures.tradingcharts.com/menu.html

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  6. The Rational PessimistOctober 13, 2011 at 2:07 PM

    Stuart. Think I have commented before in past posts on the greater suitability of Brent. Also, interesting to see FT reporting that Brent has just been added to the Down Jones-UBS commodity index and the weight of WTI reduced. This is a trend that will just keep running.

    http://www.ft.com/intl/cms/s/0/a65a3d70-f44d-11e0-824e-00144feab49a.html#axzz1ahJg0DqA

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  7. Kenneth D. WorthOctober 14, 2011 at 9:44 AM

    There is also supposed to be a pipeline (or two) to be completed in 2012 to relieve the oversupply in Cushing and get Cushing oil to Gulf Coast refiners. That will put WTI prices back in line with global prices.

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