Oil Watch: September 2013

After not publishing an update in December 2013, this month’s EIA International Energy Statistics contains new data for August and September 2013. The current world record production is 76,302.96 kb/d in July 2013. The record production in June 2013 was unseated by a massive downward revision of nearly 500 kb/d in the prior release.

This month’s largest increases came from:

United States: +262 kb/d
Canada: +209 kb/d
Eurasia: +191.49 kb/d (mostly Azerbaijan (+90 kb/d) & Kazakhstan (79 kb/d))
Brazil: +137.05 kb/d
United Kingdom Offshore: +106.21 kb/d

If the pattern that has been established through out 2013 continues, the large gain in Canadian production will be erased by revisions in the next few months. The Canadian data does not show any significant reduction from the massive flooding in Alberta which began on June 19, 2013, which leaves me without a rational explanation for why the price difference between WTI and Brent narrowed.

The largest declines were by far from Iraq presumably suffering losses from bombings of their pipelines and Libya continuing to struggle with protesters shutting down their exports.

Iraq: -450 kb/d
Libya: -230 kb/d
Norway: -151 kb/d
Algeria: -108 kb/d
Saudi Arabia: -100 kb/d

Iranian production continues to be depressed by about 800 kb/d by sanctions. If the price of crude oil rises significantly, I suspect the sanctions will fail. The rest of the world is able to compensate for the disruptions in Iraq, Libya and Iran suggesting there is more than 2,400 kb/d of unused or suppressed capacity. World production could potentially rise above 78.4 Mb/d if the geopolitical events are removed and consumers want it. In the USA over the last few years the largest increases in oil production have come in September and October and this month’s data is certainly no exception. When the data for October is released, I will be able to make an estimate of whether the shale oil boom in the U.S. is accelerating or beginning to slow, but thus far it does not appear to be slowing. Production and thus demand have been relatively flat for the last 2 years hovering around 75.5 Mb/d. Even if Saudi Arabian production begins declining at the phenomenal rate of 700 kb/d/year next year, there is still enough capacity in the system to compensate for 2 or 3 years. Under my theory, oil price shocks will primarily be caused by disruptions in oil supply and rapid declines in supergiant oil fields like the one in 2008 was fueled by decline in the offshore Cantarell oil field. Taking these factors together, I suspect a peak in world crude oil production is still several years away. Holding the price of crude oil around $100 / barrel for years has depressed demand and created an oil bonanza that is keeping production on a plateau near the peak.