Peak Oil Test Looming

Gradually rising prices are accompanying a gradual peaking of oil production and pointing to investment opportunity in buy-recommended oil and gas producers including ConocoPhillips (COP), XTO Energy (XTO) and Occidental Petroleum (OXY).

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

Comments

[scott146:]

Actually, the EIA's This Week in Petroleum reports have been showing US crude oil stocks sitting at the very top end of the historical average for quite some time(see my post US oil and gas update. So in my view, crude supply isn't the problem with respect to gasoline prices in the US. I think the key factor at this point is what US refineries are doing; the changeover to summer gasoline formulations, refinery problems, and the lack of investment in new refining capacity are what's driving gas prices higher.

2007 May 29 06:11 PM

[Saildog:]

IEA "oil" production figures include biofules and syncrude from tar sands. Because these products have low EROI's, are produced using unsustainable practices and because they have significnt levels of crude oil embedded in theirproduction, I exclude them from the IEA total. Take off 2mbpd to arrive at a "true" production level for crude oil.

The adjusted figures show crude production has actually declined since 2004. This is part of a much bigger picture. Saudi production has had a steep downward trajectory for some time now, but produced a small increase in April. Will Saudi production stabilise? Or will it continue to decline? How fast is Mexico's decline going to be? Canterell crashed 20% last year.

2007 May 29 08:14 PM

[dcappe10:]

Good article…I am interested in possibly investing in the oil sector and would like to suggest a report that caught my eye.

Oil Investing Report: How to Profit With the Oil Service Trifecta

Enjoy…Cheers!

2007 Jun 15 05:08 PM