Wednesday, February 27, 2013

National Breakdown of Recent Oil Supply Flatness

In trying to understand why global oil supply has flattened out lately (in 2012 for the whole world, and since late 2010 for non-OPEC supply), I found it helpful to make the above graph which shows the top ten countries, and bottom ten countries, for change in oil supply between the second half of 2010, and May-October 2012 (the last six months available from the EIA).

Basically, the big increases have come from the US tight oil boom (with an assist from Canada), and also from the reasonably stable countries in OPEC, which have been increasing production (principally Saudi Arabia, Iraq, UAE, and Kuwait).  Meanwhile, the decreases have been coming from ongoing exhaustion-related declines in the North Sea (UK and Norway), together with a variety of political problems around the globe (sanctions on Iran, instability in Sudan, Libya, and Syria).

So, the question of how much supplies go up or down in 2013 is likely to turn on how much the forces of entropy and political chaos affecting oil producing countries weigh against the profit motive acting to bring more supplies from stable countries.


patfla said...

Thanks. Not to nitpick but the chart doesn't include Mexico which has historically has been a large producer and in particular for the US but where production is falling sharply.

Colombia is an interesting new entrant to the roll.

Unknown said...

This is not going to say much for price. In 2012 KSA acted twice, once upwards in May-June to top 10.5 MMbbls/d but now they have acted to cut supply to under 9 MMbbls/d. This indicates they want the price above USD 100/bbl and are very willing to defend it.

At this kind of breakeven price (about USD 65/bbl for their USD 290 million budget) they can contract their supply until round 6.8 MMbbls/d without feeling much pain, that's enormous market power.

This was in Bloomberg today:

"Saudi Arabia, OPEC’s biggest oil producer, pumped 9 million barrels a day this month, the lowest level since May 2011. Output was down 100,000 barrels a day from January and 900,000 barrels from May, when production reached the highest level since at least January 1989."

This article was published today in Bloomberg, they quote Sarah Emerson of the well know oil database Energy Security Analysis Inc (ESAI):

“The Saudis have done what they needed to do to eliminate a glut of crude in the market,” Emerson said. “Brent is safely above $100 a barrel so they can stop cutting back. They will probably increase production in the second quarter.”

I found also this report on their website which is quite interesting.