Monday, December 23, 2013
So, that was a long blogging-break, no?
Sorry about that. I spent the last semester teaching a new course at Cornell which sucked up all my energy. I won't be teaching next semester, so things should be easier, but I will likely be supervising some Master's projects, as well as a restoration of my barn and an addition to my house (timber-frame, strawbale as previously studied and here implemented by Tugleywood Timberframing). So I'm going to try to ease back into blogging on a weekly schedule for now (targeting Mondays).
The first few posts will probably be catching up. I started by updating my global oil supply spreadsheets. Nothing very dramatic happened in the last three months: supply continued to inch up, and prices are a little lower than during most of the last couple of years, but $100 remains an effective floor for Brent:
(Not zero-scaled). The next picture gives close-up of the overall supply since the beginning of the great recession. Supply was flattish in 2012 and early 2013, but then managed a lift of around a million barrels/day in the second half of 2013:
This last picture shows also (green line) the narrower definition of oil given by "Crude and Condensate", which has been flatter than the "all liquids" represented by the black line:
This reflects the fact that most of the growth in "oil" supply in the last decade was not actually oil but rather biofuels and natural gas liquids (which are substitutes for oil in some applications to varying degrees).
Overall, things in the oil markets are fairly stable and not threatening in the near term; increased US production from tight oil has offset declines elsewhere in the world. However, I continue to think the situation is comparatively fragile in that there is very little spare capacity in OPEC, and so a major geopolitical disruption could easily cause a big price spike. My favorite gauge of this is how far below the maximum-ever production Saudi Arabia is. That looks as follows:
After a spike up to around 10mbd last summer, Saudi production is down by about 0.5mbd. So that's probably most of the world's proven short-term spare capacity there. Not very much in a 91mbd global supply.