The new IEA Oil Market Report is out this morning. Here is what they said about world oil supply:

Global oil supply rebounded by 490 kb/d in May to average 86.6 mb/d, lifted by higher OPEC crude supply. The rise however comes after extensive downward revisions to 1Q08 non-OPEC production and lower biofuels and NGLs for the rest of this year. Despite this, a recovery in non-OPEC output is forecast for the second half of 2008.

And they are not kidding about those extensive downward revisions because here is what they said last month:

April global oil supply fell by 400 kb/d month on month to 86.8 mb/d, pulled lower by North Sea outages, lower FSU output and weaker OPEC supplies.

So let’s do the math. If in April oil production had fallen by 400 kb/d to 86.8 that means that the previous month oil production averaged 87.2 mb/d. However 86.6 less 490 is 86.11. That means that in April, oil production fell by a whopping 1.09 mb/d not 400 kb/d. The EIA missed their guess by a whopping 690 kb/d.

And I say guess because that is all it really is. The IEA comes out with their estimate way before the vast majority of countries report their production. So they can do nothing but guess. And like the EIA their guesses are, far more often than not, too high.

All that being said, let’s not overlook, what is in my opinion, the most important part of that report: extensive downward revisions to 1Q08 non-OPEC production… Non-OPEC production reached its current plateau in November of 2003, 4.5 years ago. (Though we only have EIA data thru March 2008.) But for the last 52 months, thru March, non-OPEC production has averaged 40.98 mb/d. In march non-OPEC production was 40.99 mb/d, almost right on top of that 52 month average.

It has been dramatic increases from Russia, Azerbaijan that has kept non-OPEC on this very long plateau. Their combined increase in production, since November 2003, has been about 1.5 mb/d. But now Azerbaijan’s increase has been dramatically slowed and Russia is actually in decline. With these two crutches now removed it looks like non-OPEC production is about to fall off that over 4 year plateau, big time.

Note: The really big gainer in production, during that 52 month period, was been OPEC’s Angola. Their production increased by 1.08 mb/d during that period.

Ron Patterson