2011 July 1

The Master Resource Report  2011-07-01

IEA action one week on.    (page 1 )

I would like to buy some airplanes please.    (page 2 )

What a Fracking Mess this is.   (page 2 )

U.S. small vehicles sales?   (page 3 )

The age of U.S. power generation plants.   (page 3 )

Have a Great Fourth of July Weekend…!!

Some points to consider about global oil supplies

The EIA released its Short Term Energy Outlook (STEO) in early June. In the STEO the EIA updated its estimates for the increase in global crude oil demand in 2011 and 2012.

2011 global consumption growth estimate 1.7 million barrels per day

2012 global consumption growth estimate 1.6 million barrels per day

That means a total growth in global demand of 3.3 million barrels per day by the end of 2012. Now of course this assumes the global economy doesn’t slip back into recession before that. But to put 3.3 million barrels per day of new consumption into perspective it is about 45% of the roughly seven million barrels per day exported by Saudi Arabia in 2009. Or put another way it is more than twice the 2009 exports from Libya. The loss of which is causing so much trouble now and it headline reason for the SPR release last week.

So how does that compare with estimates for increased supply during the 2011 – 2012 period? Not good…!

The STEO projected supply from non-Opec countries would increase by an average of about 0.6 million barrels per day in 2011 and 0.5 million barrels per day in 2012. Wow, a total of 1.1 million barrels per day to offset an increase of 3.3 million barrels per day. So where is the other 2.2 million barrels per day coming from?

The only other possible source of supply is Opec. Here is what the EIA forecast for Opec supply. “Forecast OPEC crude oil production declines by 370 thousand bbl/d in 2011, followed by an increase of 660 thousand bbl/d in 2012.  EIA assumes that about one-half of Libya’s pre-disruption production will resume by the end of 2012.”

That is right 0.37 million barrels per day in 2011 and 0.66 million barrels per day in 2012. So Opec is going to supply an extra 1.03 million barrels per day by the end of 2012. But the EIA forecast needed an additional 2.2 million barrels per day from Opec to balance the crude oil flow budget.

But wait there is another source, no not the SPR (but don’t rule out more being released). The OECD countries have other inventory in storage that is not part of the various member countries SPR’s. This inventory currently holds about 58 days of consumption. The EIA therefore is forecasting a gradual draw on that inventory through the end of 2012 which will bring it down to about 52 days supply.

So by drawing from the OECD storage the EIA is able to balance its forecast of global demand. Of course the problem is that current supply doesn’t match demand, the global economy will be drawing from its oil savings account to balance the supply and demand equation. Kind of sounds like the supply is peaking doesn’t it?

Keep this in mind when reading media comments on the SPR release. The math isn’t really that hard to follow.