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Oil Production Vital Statistics April 2018

Euan Mearns profile picture
Euan Mearns

On the world stage, momentous events are unfolding. The USA, UK, and France have bombed Syria risking confrontation with Russia. The Israelis are more than a little concerned about Iranian involvement in Syria. And on the Korean peninsula, peace between N and S is on the cards, spreading prosperity and more energy consumption for all. On the second tier, oil production in Venezuela and Mexico continues to tank. No one should be surprised, therefore, that Brent has breached $74/bbl. The only thing standing in the way of another severe oil price spike is the N American frackers going back more seriously to work. They may one day be joined by frackers in Saudi Arabia, China, and Russia.

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. So important, in fact, that I have decided to leave it there from the last report 2 months ago so that it can be compared with the equivalent chart from the April OMR that is reproduced just below it.

The difference between the two charts is quite subtle but with dramatic impact. Data revisions result in crude oil stock draws for 7 quarters backdated from 4Q 18. This has meant that the IEA now sees OECD crude oil stocks at the 5-year mean at the present day. The momentum of the trend will see OECD crude oil stocks shooting to the low side. Even higher oil prices may be on their way.

Readers should note that since January 2018 I have been employed as a consultant at ETH Zurich. ETH are a well-kept secret, but are in fact the number 10 ranked university in the world, up there with CalTech, MIT and

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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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