The latest Intermational Petroleum Monthly is now out from EIA Washington. Using the July 2008 production high of 74.831 Mb/day as a reference point, global crude oil supply is now down 2 Mb/day through December of 2008, to 72.787 Mb/day. Although the data is subject to revision, the pattern of recent years has almost entirely been to revise supply lower. Also, I would note that North Sea and UK data appears to have been complicated by collection in the final quarter of 2008. That data will be important to see, when corrections finally come through this year.
Crude oil production for 2008 now averages 73.791 Mb/day. This compares with the 2007 average of 73.006 Mb/day, the 2006 average of 73.461 Mb/day, and the 2005 average of 73.737 Mb/day. Use whatever word you find most apt: Plateau. Treadmill. Peak.
The reductions are a combination of the voluntary cuts coming from OPEC, and, the price-driven cuts coming from non-OPEC. The second half of 2008 saw non-OPEC supply coming down first. Now the OPEC cuts are coming through. While we do not have the data yet, January and February will see new, chunky declines coming from Mexico, and the North Sea. I also detect the first tail off in Canadian production, as the low price begins to chew its way through free-market supply.
The world is on pace to lose about 5.5% of supply by this coming July. However, because non-OPEC producers have been so brutalized by the price crash and volatility, I am forecasting that non-OPEC supply will continue to fall right into the face of any price rise in oil. Only sustained prices above 80.00, with a more stable economic outlook, will give profit-driven non-OPEC suppliers enough confidence to produce a net, new barrel of oil.
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