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Oil Production Vital Statistics February 2018

Euan Mearns profile picture
Euan Mearns

Last month, I wrote this on the price of oil:

A correction is now overdue and I suspect we see $65 before a significant move above $70. The only bearish signal is US+Canada production growth.

The Brent front-month corrected to ~$63 and now stands on $64.37. Art Berman has an interesting article, "Oil Price Crossroad," recognising that we are now in the territory of market indecision. The IEA OMR is confusing, saying both "rebounding US production underpinned non-OPEC output growth" and "Non-OPEC output dropped by 175 kb/d in January" (I think the former is YoY and the latter MoM). Below the fold, I simply try to look at the bare facts.

The chart below from the February OMR is one of the more important produced by the IEA showing the balance between supply and demand leading to either stock draw or additions.

My version of the IEA chart taken from my 2018 oil price scenario is shown below and is based on their data. It is rather difficult to reconcile the historic data on their chart with mine.

The February IEA OMR says this:

It is clear that strong demand growth in 2017, alongside a modest increase last year in non-OPEC output, and the cuts made by leading producers, has contributed to the extraordinarily rapid fall in OECD oil stocks. A year ago, they were 264 mb above the five-year average and now they are only 52 mb in excess of it, with stocks of oil products actually below the benchmark. Although the OECD is not the whole world, the leading oil producers who agreed to cut output identified the level of the group's stocks as an indicator of the progress of their initiative. With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand. This, however, is not necessarily the case: oil price rises have come

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Euan Mearns profile picture
I was born in India in October 1957 during the waning years of British colonialism. I returned home to native Scotland as a infant and grew up in the small country town of Kirriemuir, famous as the birth place of J. M. Barrie, the creator of Peter Pan, and of Bon Scott, lead singer with rock band AC DC. In 1979 I graduated from The University of Aberdeen with a BSc degree in geology and went on to defend a PhD in 1984 that examined Crustal Evolution in Western Norway based on radiogenic isotope data. In 1983, my wife and I moved to Norway where we both worked at The University of Oslo. In this period I worked on developing methods that employed natural radiogenic isotope ratio variations in rocks and fluids to help characterise the layering and connectivity of oil and gas reservoirs and have since published a number of papers on this topic. In 1993 we returned home to Aberdeen with a one year old infant and I would establish an isotope geochemistry analysis and consulting business that would eventually employ 12 people and operate 3 mass spectrometers. Business boomed during the early years with a spate of large new field developments that would fuel the second peak in UK oil production in 1999. But a glut of oil on the market would see the oil price fall below $10 / barrel in 1998 that would lead to one of the periodic busts in the industry which my company survived but would never fully recover from. On September 11th 2001 I decided to throw in the towel and sold the analytical part of the business but continued doing consultancy work for the oil industry until 2005. In 2003 I fortuitously invested some money in a range of small oil stocks and had become intrigued to understand why their value and the price of oil seemed to be set on an ever upwards trajectory. I had for a long while been fascinated by the concept of peak oil and read a few books including Richard Heinberg’s The Party’s Over, Matt Simmons’ Twilight in The Dessert and Daniel Yergin’s The Prize. And then one day in 2006 I stumbled upon The Oil Drum blog without realising at the time that this enterprise would consume the greater part of my time for the following 7 years. At that time The Oil Drum provided unique insight to the pandoras box of the energy world that society was struggling to understand. Escalating oil and energy prices meant spreading energy poverty through the poorer parts of OECD society and throughout the developing world. Politicians and policy makers were caught off balance and did not know how to respond. Not much has changed. I have two sons, both recently graduated from university, a wife who works for the oil industry and two dogs who take me for a long walk every afternoon. I am under a certain amount of pressure to contribute to family income and so undertake occasional consulting jobs for the energy industries. But my real passion is to try and understand the various components of how The Earth energy system works and to educate politicians, policy makers and the public on Energy Matters so that better choices can be made. I hope the articles I write for Energy Matters may one day build into a book and that I may somehow make a living from data analysis, writing and public speaking. In 2009 I was appointed as Honorary Research Fellow at The University of Aberdeen where I teach occasional courses.

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Comments (2)

Calculus profile picture
all oil is priced in US Dollars so any "drifting higher" in Uncle Buck will put enormous downward pressure on oil prices...a not so uncommon occurrence in a bull market this massive.

US yields are in fact relatively high.

Growth in the US and even worse "developed" economies (Germany, Japan, Canada) is very poor actually....and China has suddenly become a stupendous exporter of refined product (gasoline and diesel.)

So far natural gas has been a huge winner to start 2018....but this of course means far larger supplies of oil being brought forth from States like Ohio and Pennsylvania...the former of which doesn't really even need oil anymore actually.

This comment has nothing to do with Tesla I might add..
Drink much on Monday nights?
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