World oil production may have already peaked at about 85 million barrels daily (mmbd) where it has been stuck for the past year (see chart Global Oil Production, below). With current demand near 86 mmbd, the difference has been made up by declining inventory.
Gasoline stored in the U.S. is especially low (see chart from the EIA, U.S. Gasoline Stocks, above). The apparent peak may be tested later this year as both the IEA and the EIA, the well-known consuming country government energy forecasters, expect oil production to break out to a new high of 87 mmbd. Regardless, maintaining current production is enough of a challenge, we think, to propel a continuation in the recently renewed uptrend in long-term oil price now quoted at $68 a barrel.
Originally published on May 15, 2007