Some oil market realities
The reality of global oil production growth since 2005 contradicts all the commentary on surplus crude flooding the market.
Global oil production since 2005 has edged up about 0.5% per year, according to Hummel. Global exports have declined because of domestic consumption growth in exporting countries. [For more on exports see the special analysis in this week’s MRR.]
How about all the hyper drilling activity in the US, won’t that provide the needed supply? Here is a little bit about what a recent Bernstein Research report had to say about that.
Will drilling activity provide a production surge? No. Rig counts are both (a) flat overall and (b) negatively skewed in terms of mix shift to lower quality resource plays. Given the one to two quarter lag between rig count and production response, the rig count would need to start rising now to provide barrels in calendar year 2013. Doesn’t the market already know this? No. [For more on the US drilling activity see the API data in this week’s MRR.]