The Oil Drum

69 comments on This Week in Petroleum 9-12-07

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ace on September 12, 2007 - 8:30pm

Hi LevinK,

I believe that the balance between supply and demand in the oil market is tight. The effective spare capacity of 2.85 mbd is comprised of undesirable 2.50 mbd heavy sour crudes from Saudi Arabia and Kuwait, and only the remainder of 0.35 mbd is desirable light crude (see IEA OMR June 2007 page 15, http://omrpublic.iea.org/omrarchive/12jun07full.pdf). The oil price is due mainly to supply and demand factors and to a lesser degree, psychological factors.

The chart below has been updated for 0.5 mbd OPEC quota increase and for IEA Sep 2007 OMR

click to enlarge

From the IEA OMR report:

World oil supply fell by 430 kb/d to 84.6 mb/d in August, on North Sea and Mexican outages, plus lower Iraqi exports. Forecast non-OPEC supply remains 50.0 mb/d in 2007 and 51.1 mb/d in 2008. Saudi Arabia underpins 660 kb/d of OPEC NGL growth next year. Risks to 2008’s broad-based growth are biased towards the FSU, project delays and extended field outages.

The average world total liquids production, for Jun, Jul and Aug 07, is only 84.6 mbd, according to the IEA monthly data. OPEC’s quota increase and end of summer maintenance should keep supply just over 85 mbd for winter. Note that the IEA OMR Sep 2007 indicates a demand of just under 88 mbd for the fourth quarter of 2007 (Oct 07 - Dec 07). The next four months could be extremely tight for supply and demand.

The 660 kb/d of OPEC NGL growth next year (from IEA quote) and the 500 kb/d from Saudi’s Khursaniyah project have the potential to keep supply above 85 mbd for 2008.

For the most recent full forecast update please click here

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davebygolly on September 12, 2007 - 8:37pm

The effective spare capacity of 2.85 mbd is comprised of undesirable 2.50 mbd heavy sour crudes from Saudi Arabia and Kuwait, and only the remainder of 0.35 mbd is desirable light crude...

Is this new, having so much of the spare capacity in heavy and sour? What's the history?

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ace on September 12, 2007 - 9:17pm

Much of the surplus heavy sour crude capacity was used from 2003 to 2006. The OPEC production cuts in late 2006 and early 2007 were mainly heavy sour crudes from Kuwait and Saudi Arabia. http://www.eia.doe.gov/emeu/steo/pub/3atab.pdf

In 2002 there was significant surplus capacity of both heavy sour and light crudes.

Here is a chart showing surplus capacity history.

click to enlarge