Global oil market has changed the structure

Change of the global petroleum supply and demand structure that was caused by the shale revolution has been obvious this year.

Shale oil production increased especially in North America and influenced significantly on local crude oil prices. The U.S. Energy Information Administration chose Brent crude instead of domestic WTI for reference price in its long-term forecast report for the first time, since the domestic marker price has been far different from other international marker prices.

World petroleum demand exceeded supply during 2011 due to the supply disruption caused by the Arab Spring and the Libyan civil war, but the supply became excess in 2012. Although OPEC member countries reduced output in the later half of this year, average supply and demand balance in 2012 is estimated at 50,000 barrels per day of excess by the EIA.

Meanwhile, EIA forecasts 50,000 bpd of supply shortage in 2013. But OPEC and International Energy Agency still predict slight oversupply in the next year. (see the table)

OPEC and IEA do not give forecasts for total global petroleum supply figures. But we can calculate necessary OPEC crude oil by using their prediction on global demand and petroleum supply excluding OPEC crude.
According to both organizations' figures, needed OPEC crude oil supply in 2013 are estimated below the current production quota of 30 million bpd.

Latest estimation on OPEC crude production are between 30.5 million bpd and more than 31 million bpd. So, global petroleum supply could be excess if OPEC members do not continue to reduce supply further.
However, we have not seen less OPEC output than production quota for long. Therefore, global petroleum market is likely to be slight oversupply in 2013.

On the other hand, that oversupply is unlikely to move the crude oil prices.
Oversupply of 1.6 million bpd caused crude oil prices to sink to the lowest level in past 3 decades in 1998, while the market was supply shortage of 1.6 million bpd before crude oil prices reached the historical record in 2008.

The gap between global oil supply and demand in the next year is expected at about several tenth thousand bpd, and such small figures won't influence on the crude oil market.

Global petroleum supply was capped at around 85 million bpd in the later half of 2000's. The limit of traditional crude oil production seemed to be one of the reasons of crude oil price surge during 2007-2008.
The shale revolution has already removed the limit.

Since the shale revolution is also boosting natural gas production all over the world, the global consumption structure of fossil fuel is changing as well.

Crude oil prices are unlikely to be supported by supply factors in the future, except for severe supply disruption by the war or a case of significant environmental regulations against shale oil/gas development.

Introduction of strict regulation on energy production seems to be quite difficult, as offshore oilfield developments are still ongoing globally despite the shocking oil spill in the Gulf of Mexico in 2010. The shale revolution is unlikely to be retracted.

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