Expect Oil Prices to Rise: Three Major Oil Exporters Warn About Production 26 comments
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In the last two weeks alone, three of the world top oil exporters have warned that their oil production will decline faster than expected in the next one to three years:
August 19th: Russia warns (World 2nd largest exporter - EIA 2007)
Russia's oil production will decline year-on-year in the next two years, as the current oil fields will dry out and opportunities at the new fields will be limited, the country's Finance Ministry said Thursday, as it cut the country's oil and gas production outlook for 2009, 2010 and 2011.
In its projection of the budgetary policy for the period between 2010 and 2012 the ministry said it expects oil production to decline 0.6% to 485 million metric tons (3.638 billion barrels) in 2010 from 2009, and drop a further 0.4% to 483 million tons in 2011. The ministry expects 2009 production to be at 488 million tons, which is at par with the 2008 level. The forecast decline, while consistent with many independent outlooks, is a sharp change from the ministry's previous estimate, which saw a steady rise in production in all three years.
August 29th: Mexico warns (World 13th largest exporter - EIA 2007)
Mexican authorities said they expect average daily crude output to fall in 2010 to 2.5 million barrels per day, which would represent a four percent drop compared with the first half of this year and a decline of 14 percent since 2008.
Both officials said the decline was due primarily to the steady depletion of the offshore Cantarell field, once Mexico's largest.
'We're seeing a significant decrease in ... Cantarell, and so for the coming year we're estimating that we're not going to be able to recover the levels of production we previously had,' Kessel said.
September 1st: Norway warns (World 4th largest exporter - EIA 2007)
A Norwegian Petroleum Directorate report said Tuesday that oil production is expected to average 1.91 million barrels per day this year, and dwindle to 1.62 million barrels per day in 2013, a 10 percent larger decline than projected last year.
Production was about 2.2 million barrels per day at the end of 2008, after falling from a peak average of 3.1 million barrels per day in 2000.
What is of interest is that all those warnings are being issued by governmental entities, which usually tend to lean on the optimistic side.
Meanwhile oil demand in the developing world continues to grow at a brisk pace underpinned by strong economic growth and strong car sales especially in China and India, where implied oil demand in July grew by 3.5% and 3.6% year over year respectively.
It does seems that as the world economy rebounds, the forces of declining supply and growing demand will continue to exert upward pressure on oil prices.
Disclosure: The author is long oil stocks, specifically China North East Petroleum (NEP).
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This article has 26 comments:
Whilst everything is aligned with Demand, Production, Consumption and Reserves, all heading North, the Global "Economic Growth Fairy" is happy & all was well with the world.
However, when the economic enabler (Cheap & Abundant Oil ), is ending, as Production effectively Peaks, while Demand & Consumption continue to head North, then Reserves are Depleted, in double quick time!
That said, it is likely that Global Economic Growth will ratchet down, as will share Prices & the Oil price will ratchet up, over the next 3-4 years.
Innovation, is now the final frontier for economic sustainability, the "exponential Economic Growth Fairy" is no more, it died of "shortages of natural causes (oil)”, in 2005, but in the long run, we are all dead.
The warning bells will ring loudest, when the Saudi's follow the others and announce their fields are set to follow with lower Production, particularly regards the Ghawar fields.
The "fundamentals" are now changing!
However, this is a useful articles. Suddenly the ignoramuses have emerged from their conference rooms and started selling nonsense again to eager buyers, so for the first time in years we hear again that the oil price will be in the twenties soon. Your last paragraph needs to be widely circulated.
This has been happening for yrs and few believe it. But it is happening as oil production has peaked. We have for decades only found 1 bbl for every 3, now 4 bbls we use. It was only a matter of time that this would happen. So many of you laughed at peak oil, well are you laughing now?
Luckily for me I drive an EV that gets 250 and 600mpg cost equivalent for fuel. And I build custom EV's so my future is bright. How is yours?
As a note oil will go down in price until Dec or maybe spring when the economy finally starts recovering, then oil rockets back to $150/bbl, killing the recovery. Isn't life grand?
The only solution is stop subsidizing oil and put all it's costs in it now which will force us to change to olil independence. Or we will be slaves to Iran, Russia, oil dictators and terrorist. With the oil tax with revenue going to a tax cut and help switching to more eff vehicles, etc our economy will grow or we can keep up the oil wars, make our enemies rich. Your choice!!
What is happening Nawar ? Is NEP falling apart ?
You appear to be focusing on the short term. In the short term, there can be wide variations between a stock's price and the actual value of the company. However, if the price of a company's stock is signficantly lower than its value and the value of the company continues to rise, particularly due to good return on equity, then the price of the company's stock will inevitably rise.
On Sep 02 12:03 PM cuewen wrote:
> NEP has fallen more than 15% since last week from 5.60 to 4.40 now.
>
> What is happening Nawar ? Is NEP falling apart ?
On Sep 02 12:03 PM cuewen wrote:
> NEP has fallen more than 15% since last week from 5.60 to 4.40 now.
>
> What is happening Nawar ? Is NEP falling apart ?
Far from it!, I believe "seasaw" gave you the best answer, the short term fluctuations in the stock price are not necessarily reflective of the company intrinsic value; I believe the most important growth phase for the company will take place in the next 4 quarters, as the company resumes drilling at full speed and as they execute their long term growth initiative in terms of an acquisition or a new lease; all this in the context of a rebounding economy and much better oil prices.
Regards,
Nawar
On Sep 02 12:03 PM cuewen wrote:
> NEP has fallen more than 15% since last week from 5.60 to 4.40 now.
>
> What is happening Nawar ? Is NEP falling apart ?
> The follow up point to this article should be that all the cuts mentioned in the article only makes OPEC more powerful. Current OPEC production allows for a 7 million barrel a day increse. OPEC is sitting on that much spare capacity which m,ore than makes up the cuts from Russia, Norway and Mexico but it decreases our security that much more so. >
--
On the other hand, that spare capacity is largely a result of a significant drop in demand due to the so called "Great Recession". Last year OPEC was running flat out as were other producers around the world and yet we were still having large drawdowns in inventories.
www.energycurrent.com/...
Despite the recession, China has been selling cars at a very rapid pace, more than have been sold in the US this year, at one point, and perhaps that is still the case. India has also been selling a lot even if many are of the fuel miserly variety (ie. Tata Motors).
Despite the expected increases in fuel economy, alternative vehicles such as PHEVs & EVs, demand is likely to surpass that of 2008 in the near ro mid-term, at least if the world economy recovers substantially. Given that those estimates of declining production were from 2007, and the world has been consuming some 85,897,000 barrels of oil per day since then www.eia.doe.gov/basics... , and some of the declines are more significant than predicted, as has been the case with Mexico, seekingalpha.com/artic... , it would seem to me that there is a significant risk that production levels won't be able to rise as rapidly as demand appears set to do.
Ssh, Nawar! You might wake up the dopes who believe everything that is said on CNBC and think oil is going back to $20 per barrel.
WAKE UP, AMERICA!
By-the-way, 3 billion barrels of oil is an estimate nor a given. It is a media sound bite. Even if it were true it is also true that you can recover only about 25% at best. And at what rate can you get it to market? Don't get too excited about that future estimate. It is a pie-in-the-sky estimate.
Regards,
Nawar
online.wsj.com/article...
Luckily we in America have been responsible with our resources and have saved up huge sums of money, so we will be able to easily afford this more expensive oil!
OXY has 1.1 million acres that are potential for this.
Some think that since we peaked, no one will find anymore oil, companies will continue to find oil for decades, however the quantity or quality will not match what we discovered in the last 150 years.
Many don't know that oil onshore production peaked in 1982, and most oil today is produced offshore, companies still find oil here and there on shore, but they never reversed the peak.
Regards,
Nawar