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Oil Price

What is the World prepared to pay for crude oil above 73 mb/d?

Data published by the Energy Information Administration (EIA, International Petroleum Monthly) in January 2010 show that crude oil production for October 2009 just exceeded 73 mb/d, a level reached several times in the last years during the 4th quarter. The increase is a result of US oil production going up (=recovery during a hurricane free season and therefore very vulnerable) and Russian production stronger than expected.

fig_1c_2009_10

Apart from long term structural changes in the demand and supply of oil, there are seasonal fluctuations so it is best to compare figures of the same time of the year.

crude_by_month_2004_2009_oct

Very clear: the world is only around 1 mb/d away from the critical 74 mb/d mark. This threshold was exceeded in only 6 months in the last 6 years. So let’s see what prices the world was prepared to pay for around 73 mb/d in the month of October. Oil prices are from here:

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=M

crude_oil_cushing_2001_2009_oct

Clearly, the world changed in 2004/2005 and again, to a smaller extent, in 2007.  So anyone trying to grow our oil dependent economy will drive up oil prices to new levels.

non_opec_2009_10

This graph shows that Non-OPEC’s decline continues whether there is a financial crisis or not, in particular when looking at the production excluding the US and Russia, which are stacked on top. So what will happen in the next hurricane season in the Gulf of  Mexico?

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