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OPEC going sideways; not a good time for oil importers

The IEA Medium Term Oil Market Report 2010

sees OPEC’s capacities increase 1.94 mb/d by 2015. But will production also increase?

Let’s put the table “Estimated Average Sustainable Crude Production Capacity” from page 82 into some graphs. We start with the decline.


Although the report mentions a whopping  7.1 mb/d decline until 2015 (at field level), at country level the decline is just 850 Kb/d, mainly from Iran. See impact on oil exports in this post:

On top of the decline curve we stack the incremental increases in capacity:


OPEC’s increase is heavily dependent on Saudi Arabia and Iraq. In fact, without increases  in Iraq OPEC is back to square one in 2012/13. Imagine the conflicts within OPEC about quotas for Iraq (at present outside the quota system) while Iran’s production is declining.

Ok, so we have an increase of 1.9 mb/d, but on what?  The quoted table on page 82 says on 34.85 mb/d (OPEC 12) to make it 36.78 mb/d by 2015. Let’s have a look at previous IEA capacity calculations and compare them with actual production:


We see that in the series of medium term oil market reports starting with 2006 the estimated capacity was continuously reduced by around 2 mb/d until the 2009 report. The slightly more optimistic 2010 report is a bit up again, but mainly because of Iraq. More importantly, a huge gap between capacity and actual production has developed, suggesting there is plenty of spare capacity. While one may argue the 2009 drop in production was the result of less oil demand after Lehman Brother’s collapse,  the following financial turmoil on global markets and the recession,  that was not the case in the 1st half of 2008 when the economy was booming and high oil prices encouraged maximum production. Yet,  OPEC’s claimed oil production capacity was not turned into actual production.


The  MTOMR  2007

estimated a capacity of 31.06 mb/d for OPEC 10 including Indonesia (which is now no longer in OPEC as this country has become a net oil importer). So without Indonesia, but including Iraq, the capacity in 2008 was supposed to be 31.06 – 0.88 + 2.4 = 32.58 mb/d while actual production was 29,49 mb/d, a difference of 3 mb/d. Saudi Arabia alone did not deliver 1.7 mb/d during the critical period June/July 2008 – shortly before the Olympic Games when China went into the oil markets with an extra demand of  800 kb/d (see IEA oil market report October 2008, page 14)

So we have to be very careful with those capacity estimates. The safest way to estimate future supplies is by adding the net increments to the actual production of 2009 which we do in this graph:


According to the latest IEA Monthly Oil Market Report

crude oil production for OPEC 12  in 2009 was 28.69 mb/d. From this base we add 1.94 mb/d to make 30.63 mb/d. If we assume a spare capacity of nominally 1 mb/d there won’t be much more crude oil in 2015 than there was at the 2008 peak. Consider rising domestic demand in all OPEC countries and crude oil exports from OPEC will shrink. Not a good time for oil importers.

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