The Oil Drum

Calling Peak Total Liquids of 85.52 million barrels/day on Aug 2006

Based on the recent IEA monthly report data
http://omrpublic.iea.org/archiveresults.asp?formsection=tables&formdate=...
I have updated the chart above and peak total liquids production is on August 2006. This assumes that Saudi Arabia’s recent “voluntary” production cuts are actually involuntary. If Saudi Arabia really does have spare capacity then peak total liquids will probably be deferred. Even if they do have spare capacity and no other country does, Saudi Arabia may choose not to use this capacity since increasing oil prices will make their remaining oil reserves increase in value.

Forecast assumptions:
World total liquids supply declines at -0.5%/year and demand increases at 1.7%/year.(updated for new IEA Jan 2007 monthly report)
The demand growth comes mainly from China, Other Asia and Middle East while growth rates from OECD vary from 0.1% to 1.0%. These growth figures are based partly on the IEA monthly market reports. Liquids include crude oil, lease condensate, NGLs and processing gains. Although forecast demand is greater than supply, the gap is closed by increased price because ultimately demand must be approximately equal to supply.
Mild northern hemisphere winter weather is assumed to continue and the price forecast from Jan2007 to Jun2007 is assumed to be a simple linear regression forecast based on the oil price (SDR) historic trend from Jan2002 to Dec2006.
Price elasticity of oil demand is assumed to increase from 0.10 in Jul2007 to 0.52 in Dec2010. The elasticity is assumed to be the same for increasing and decreasing prices. Elasticities are assumed to constant for all countries. For an interesting paper on elasticities –
http://cta.ornl.gov/cta/Publications/Reports/ORNL_TM2005_45.pdf
The oil price is forecast is SDRs (Special Drawing Rights) which simulate a global currency. The USD has devalued significantly against the Euro during the last few years and oil price increases measured in the USD gives a distorted view. It is assumed that the USD:SDR exchange rate remains constant at 1.50 from Jan2007 to Dec2010. The SDR is explained in http://www.imf.org/external/np/fin/data/param_rms_mth.aspx
The time dimension unit of a month was selected because supply figures are given monthly. Demand data is quarterly and is assumed to be the same for each month in the quarter. Prices are assumed to be month end and are from http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm
“All Countries Spot Price FOB Weighted by Estimated Export Volume (Dollars per Barrel)”