Oilwatch Monthly July 2009

The July 2009 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.3 MB, 32 pp).

Figure 1 - OECD oil imports from 1st quarter 2002 to 4th quarter 2008

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A summary and latest graphics below the fold.

Latest Developments:

1) Conventional crude production - Latest figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 62,000 b/d from March to April 2009, resulting in total production of crude oil including lease condensates of 72.04 million b/d. The all time high production record of crude oil stands at 74.82 million b/d reached in July 2008.

2) Total liquid fuel production - In June 2009 world production of all liquid fuels increased by 70,000 barrels per day from May according to the latest figures of the International Energy Agency (IEA), resulting in total world liquid fuel production of 83.67 million b/d. Average global liquid fuel production in 2009 up to June was 84.33 million b/d versus 86.6 and 85.32 million b/d in respectively 2008 and 2007.

3) OPEC Production - Total liquid fuels production in OPEC countries increased by 70,000 b/d from May to June to a level of 33.73 million b/d. Average liquid fuels production in 2009 up to June was 33.39 million b/d, versus 36.09 and 35.02 million b/d in respectively 2008 and 2007. All time high production of OPEC oil liquid fuels stands at 36.58 million b/d reached in July 2008. Total crude oil production excluding lease condensates of the OPEC cartel increased by 70,000 b/d to a level of 28.68 million b/d, from May to June 2009, according to the latest available estimate of the IEA. Average crude oil production in 2009 up to June was 28.50 million b/d, versus 31.43 and 30.37 million b/d in respectively 2008 and 2007.

4) Non-OPEC Production - Total liquid fuels production excluding biofuels in Non-OPEC countries remained stable in June 2009 at 48.95 million b/d according to the International Energy Agency. Average liquid fuels production in 2009 up to June was 49.49 million b/d, versus 49.32 and 49.34 million b/d in respectively 2008 and 2007. Total Non-OPEC crude oil production excluding lease condensates decreased by 62,000 b/d to a level of 41.87 million b/d, from March to April 2009, according to the latest available estimate of the EIA. Average crude oil production in 2009 up to April was 41.81 million b/d, versus 41.32 and 41.80 million b/d in respectively 2008 and 2007.

5) OECD Oil Consumption - Oil consumption in OECD countries decreased by 1.55 million b/d from March to April to a level of 43.07 million b/d. Average OECD oil consumption in 2009 up to April was 44.59 million b/d, versus 46.10 and 47.68 million b/d in respectively 2008 and 2007.

6) Chinese & Indian liquids demand - Oil consumption in China increased by 445,000 b/d from March to April to a level of 7.4 million b/d. Average oil consumption in China in 2009 up to April was 6.84 million b/d, versus 6.92 and 7.29 million b/d in respectively 2008 and 2007. Oil consumption in India increased by 85,000 b/d to a level of 2.94 million b/d. Average oil consumption in India in 2009 up to April was 2.94 million b/d, versus 2.60 and 2.43 million b/d in respectively 2008 and 2007.

8) OPEC spare capacity - According to the International Energy Agency total effective spare capacity (excluding Iraq, Venezuela and Nigeria) in June 2009 increased to 5.13 million from 4.96 million b/d in May. The IEA estimates Saudi Arabia currently capable of producing an additional 3.2 million b/d within 90 days, the United Arab Emirates 0.60 million b/d, Angola 0.3 million b/d, Iran 0.2 million b/d, Libya 0.23 million b/d, Qatar 0.12 million b/d, and the other remaining countries 0.48 million b/d

Total OPEC spare production capacity in June 2009 increased to 4.44 million from a level of 4.34 million b/d in April according to the Energy Information Administration. Of total spare capacity 2.65 million b/d comes from Saudi Arabia, 0.24 million b/d from Qatar, 0.33 million b/d from Angola, 0.30 million b/d from Kuwait 0.30 million b/d from the United Arabic Emirates, 0.10 million b/d from Iran, and 0.52 million b/d from other countries.

9) OECD oil stocks - Industrial inventories of crude oil in the OECD in May 2009 decreased to a level of 1017 million from 1022 million barrels in April according to the latest IEA statistics. Current OECD crude oil stocks are 61 million barrels higher than the five year average of 956 million barrels. Industrial product stocks in the OECD in May 2009 increased to 1452 million from 1422 million barrels in April according to the latest IEA Statistics. Current OECD product stocks are 59 million barrels higher than the five year average of 1393 million barrels.

10) OECD oil imports - Oil imports in the group of OECD countries decreased by 146,000 b/d from 3rd to 4th quarter of 2008 to a level of 32.03 million b/d. Average oil imports in OECD countries in 2008 was 32.19 million b/d, versus 32.47 and 32.7 million b/d in respectively 2007 and 2006.

Figure 2 - World Crude Oil Production from January 2004 to April 2009

Figure 3 - World Liquid Fuel Production from January 2004 to June 2009

Figure 4 - OPEC Liquid Fuel Production from January 2004 to June 2009

Figure 5 - OPEC crude oil production from January 2004 to April 2009

Figure 6 - Non-OPEC Liquid Fuel Production from January 2004 to June 2009

Figure 7 - Non-OPEC crude oil production from January 2004 to June 2009

Figure 8 - OECD Crude Oil Stocks from January 2002 to May 2009

Figure 9 - OECD Oil Product Stocks from January 2002 to May 2009

Thanks for posting this!

One thing I notice is that current crude oil production is back down at the level it was in 2004. It seems like that is significant, especially considering that China and India have grown quite a bit since 2004, leaving less for the rest of us.

What I find interesting is that in the US, the number of jobs is back down to 1999 levels. I would imagine this is similar in other OECD countries from what I have heard generally. Yet oil consumption does not appear to have dropped off nearly as much at 2004 levels.

I wish I had time to dig into this in more detail, maybe I'm missing something.

Gasoline demand hasn't budged much, people still need to drive, possibly more than ever, as they tool around looking for work; the same not being true of more discretionary air travel = jet fuel; with the economy in the shape it is consumption of distillates is down and we have a record build in stocks. Thus it isn't surprising to see gasoline consumption holding steady.

This is a chart of gasoline/jet fuel/distillate consumption YOY:

Matt Mushalik asked me to post some of his incremental production graphs, based on EIA crude oil data.

The OPEC graph shows that Saudi Arabia has been the country with the big production cut.

The graph with countries which are already declining stacked at the bottom (1c) shows that these countries have continued to decline:

Figure 1d with the growing countries stacked at the bottom shows that these countries haven't been growing all that much recently.

The OPEC graph shows that Saudi Arabia has been the country with the big production cut.

No kidding - since the financial collapse of 2008, Iraq replaced Saudi Arabia as the #1 oil producer in the Middle East. I wonder which of Iraq and Russia is the world's #1 exporter?

Obama's leaving a permanent force of 50,000 troops in Iraq, to help Iraq export what remains. This is as many troops as we left behind in Korea for decades. Once the oil has been exported, I suppose the mission will be accomplished?

what ?

... since the financial collapse of 2008, Iraq replaced Saudi Arabia as the #1 oil producer in the Middle East.

... and what ?
I reckon you misread Gail's top chart. ... there is something mentioned on "incremental"

BTW , Rembrandt thanks for your 'Monthly Viagra'.

I reckon you misread Gail's top chart. ... there is something mentioned on "incremental"

you're right, i misread the charts completely. goes to show what a shallow understanding i have of oil production.

Gail - I'm having trouble understanding the graphs.

What is the "baseline"?

Does the graph presume an amount of production over baseline at year 1?


Imaging you have graphs for a number of countries, all expressed in barrels per day. For each of the graphs, chop off the bottom piece of the graph, that shows no variability. For example,

In other words, subtract an amount equal to the lowest production during the period shown on the graph for each country. In the graph above, it occurs when hurricanes interrupt production. That is the baseline production.

Then produce a graph by adding up the tops of the various graphs. The band width shows how a particular country's production has increased or decreased. So what a person is looking for is changes in band widths--narrower widths mean less production for that particular country.

Matt has some groupings of countries he uses. All countries that he think peaked in 2005, for example. The bigger countries are shown separately, though.


Now that you've pointed it out, it's crystal clear!


Since it is an incremental view, the base production does not really matter and is somewhat arbitrary. I think he set it up so that it sums to match the current total.

It would be really slick to be able to adjust the baseline with a Flash interface or the like; this is one of those fancy web presentations I can easily visualize but have no idea how to implement.

The base production is not arbitrary. It is the sum of all minimum crude production by country, starting with January 2001. Of course base plus incremental production must add up to the total as shown in Rembrandt's curves. Iraq shows up with a large amount of incremental production because of the production drop during the Iraq war. The same is true for Venezuela which had a strike causing a big decrease in production.

The graphs are an update to:

Bumpy Crude Oil Plateau in the Rear View Mirror

It could be arbitrary. I did say in this case that it added up to current full production. But it could be arbitrary, and that knowledge separates people that understand calculus from those that don't. :)

Maybe I was too flippant. The base production is an invariant and therefore it can be removed. The calculus comment means that you can also called it a differential production curve.
P(time) = P0 + dP(time)

in which case you can see that P0 can be removed with no loss of generality in the time dependence.

...the base production is invariant

Wrong. If for example in the next month UK or Norway drop to a new minimum the base production will change.

It is being re-calculated every month.

It is invariant over the span of the graph.

What you are describing is something he has not plotted.

I don't know why we are arguing over this. Let me just state the algorithm:

1. Scan through production levels for each country over a time range
2. For each country i, store the minimum production level Po(i)
2. Sum Po(i) over all countries i, call this total the invariant Po
3. At each time and country, store the differential of dp(i)=(P(i)-Po(i))
4. For each time value, create a stacked bar graph of the sum of dp(i), using Po as the invariant baseline

Let us argue over the algorithm so we don't get lost in the ambiguousness of the english language.

I admit I haven't been keeping up lately, but I'm surprised to see that Iraq looks like the biggest single OPEC producer. Or am I misreading this graph?

Yes, you are misreading. See subthread right above this for explanations.

i love watching these graphs continue to look more and more like the top of a bell curve with the right half descent beginning to form.

It's like watching a fatal car wreck in slow motion. What's to love about it?

Seriously - it makes my heart clench.

you're right, love is the wrong word.

the chinese proverb about may you live in interesting times...i remember reading some article, maybe it was by kunstler, saying how eventually we may regret living in such interesting times, and that fascination may turn to bitterness and loathing.

but right now i'm fascinated. unfolding before our eyes is what will most likely be the defining "event" of this century. who really knows how things will play out.

Personally, I have never felt this alive. My life used to be a predictable dull tedium. Learning of Peak Oil in early 2004 led me to a depression that lasted until mid-2007. Since then, every day brings me a little more time to prepare for the strangest, most exciting, and perhaps most terrifying time of our lives. I appreciate people and nature more than in the past and choose to participate in my community in ways that I never did before. I may live to regret these words, but who would want to miss it?

I first grokked peak oil in 2005, and there was a week of severe cognitive dissonance. Never any depression or anger, though. Since then, my respect for acquaintances has readjusted along peak oily lines. Guy who hoards AK-47s and grows veggies? Big respect now. Guy who volunteer blogs for Obama? Less than before.

I always had a taste for the absurd, and indulged it via movies. Now I get that for free from the real world. Case in point - when I see a Sci Fi movie now, I don't feel anything. But when I drive on the freeway, I get a mildly creepy feeling: "this is the highest technology i'll ever have. i should enjoy it while it lasts. it won't be around for long."

We seem to view things similarly. I pride myself for being a realist. This lead to a very rational and predictable plan for my life that left me very bored. Now, I have no idea what is to come and my only guide is that it is far better to embrace the future than cling to the past.

You guys must not have kids.
I used to laugh at risk and look for ways to cheat death(Navy Jet Pilot, securities trader, all around adrenaline junkie) that is until I had my son and that all changed.
Funny how you hear that over and over but until it happens to you it doesn't find it's mark psychologically.
I have mixed feelings toward this unknown future that we are entering.
I think that it is certain that things will be less available, less complex and of course more perilous.
On the other side of the ledger much of it was superfluous and even destructive long term and needs to go anyway.
It will be a mix of positive and negatives but of course many more negatives.
Nature is reasserting her authority.

I have twin boys, and I understand how you feel. They are probably the trigger that helped me understand PO - until they arrived, I was a diehard techno-cornucopian, and risked everything for a career in videogames. The risk paid off, but for how long?

Like you say, much of our lifestyle was superfluous, but many of us depend on superfluousness to put bread on the table. Letting go of that will be painful, especially in America.

I am child-free. I imagine that if I had that responsibility I would be raising them quite differently than the societal norm. I have no nieces or nephews and the closest thing in my family would be my cousin’s children. His kids seem to like me because I am their “crazy uncle”, but his wife doesn’t want me being around anymore. Basically, I said that it was wrong of them to forbid their twelve year old son from buying a skateboard -- with his own money -- on the basis that he may hurt himself. The real concern for their son, as I see it, is that he is grossly overweight (as are his parents) and his weight will cause a bigger risk to his long-term health than skateboarding will. I guess my advice on parenting did not go over very well.

The real concern for their son, as I see it, is that he is grossly overweight (as are his parents) and his weight will cause a bigger risk to his long-term health than skateboarding will.

You are spot on! 20 years ago I worked for DuPont and the company claimed to be the safest company to work for in the world, in fact you are safer at work than at home I was told during my induction. One day I was standing on a lump of metal that was to all intents and purposes imovable, but regardless it was not designed for standing on and I was forced to fetch a pair of step ladders which where designed for the purpose, but far less stable. On my leaving day I was interviewed, as was every body who left the company, as to why I was leaving.
The guy interviewing me was responsible for safety and was chomping on a bag of crisps with his large belly pushed against the table. I took the oportunity to suggest that eating crisps and being overweight was not safe. I had waited 5 years to say this, as like your cousin's wife he may not have wanted me round any more!

When I see a SciFi movie now, it occurs to me that a SciFi flick could be a medium for disseminating a bit of useful information to the larger population. Your typical Hollywood flick shows the huge meteor, or the invading alien fleet, heading towards the planet Earth, then lots of stuff blowing up, people running around screaming, buildings falling down. So you need some of that to get people into the theatres. ABC did a 21st century what-if TV special not too long ago, but they softballed it, probably turned a lot of people off. Maybe some peaker out in Hollywood is putting together a script now, something like an Alas Babylon after-the-war type of scenario. Costner's "The Postman" is maybe the closest thing that I can think of right now.

I have always seen the entertainment media as a mind shaping mechanism.
Just look at all the video games that are popular now. All have war themes and it is obvious to me that it is training our young to be adveturous glory seekers. In fact many soldiers play these very same games as simulators for combat training.
This same type of technique worked on myself. I remember back when I was in college that a bunch of war related movies and programing came out and not coincidentally it was just before Reagan put the military budget on steroids and recruitment went through the roof. The media has always been used to mold the perceptions and opinions of the masses.
I am not saying that I realized what was happening to me then but in retrospective analysis it comes to light.

Go look at the website for the movie 2012. Mostly natural disasters, not human made but we build arks to try and save ourselves. Coming to a theatre near you later this year

The movies Mad Max (1979) and Soylent Green (1973) should be two peak oil staples.

Just look at all the video games that are popular now. All have war theme

Top ten video games this week:

1 Wii Fit
2 Wii Sports
3 Fight Night Round 4
4 Wii Sports Resort
5 Fight Night Round 4
6 Hatsune Miku: Project Diva
7 EA Sports Active
8 Mario Kart Wii
9 Pokémon Platinum Version
10 Call of Juarez: Bound in Blood

1,2,4,7 are cartoon sports games (tennis, golf, bowling, etc.)
3,5 are realistic boxing simulators
6 is a music rhythm game and teen idol simulator
8 is a cartoon go-kart simulator
9 is a cartoon fantasy.. er.. stuffed animal cock-fighting sorta thing? it's pokemon.
10 is the videogame equivalent of a "western movie."

in videogames the top 10 games make 80% of the money. of them, only #10 has a war theme.

Ok you have me there.
If you ranked them by demographics particularly age I bet in the 10 year male and up category you would find that many of the leading games have violence and war themes.
Just the fact that they are rated for content with "V for violence" etc. and then looking at your list tells me that many of the games on your list are probably being used by stay at home debt user moms as electronic baby sitters.
The war game themes I bet are by far the most popular in the target demo that being 10 year and up males.
It is the 7 year old girls that skew the numbers. And the fact that the parents are a filter via the rating for age/ content on the package.

Not trying to impugn your profession just observing.

How are these games rated, by numbers playing or by games sold? Starcraft, Call of Duty, Counterstrike, World of Warcraft and Warhammer are all online games with millions playing at any one time - they all have conflict based storylines.

If the top ten refers only to recent games sold and does not include the continuing to play aspect then it is not a good parameter for determining which games grasp our imagination.

Just my opinion


The top ten list above is by retail sales. The best-sellers are all for television consoles - you're talking about PC games, which sell very poorly by comparison.

Are violent games popular with adolescent males? Sure. Do realistic violence simulators sell? No. The market is dominated by cartoon sports, guitar simulators, and random cartoon hand-held games.

The UK is a good example of how misleading high flow rates can be, especially for exports. Their all time record high production and net export rate was 1999 (EIA). However, as of the end of 1999, the UK had shipped 81% of their total cumulative net oil exports. Two years later, at the end of 2001, their cumulative net oil exports were 90% depleted.

In terms of their post-peak cumulative net oil exports, the UK shipped almost 50% in just two years. In 2000 and 2001, the UK was shipping one percent of their post-1999 cumulative net oil exports about every 15 days. They became a net oil importer in 2006. It's also notable that the net export decline phase, from peak exports to net importer status, corresponded to almost no increase in UK consumption (only 0.2%/year).

Sam Foucher’s modeling work indicates that the top five net oil exporters–Saudi Arabia, Russia, et al–will have shipped about one-third of their post-2005 cumulative net oil exports by the end of next year, with about 60% having been shipped by 2015. His work suggests that the top five are now shipping one percent of their post-2005 cumulative net oil exports about every 50 days or so.

BTW, anyone notice a pattern in the following numbers?

Some Net Oil Exporters Showing Production Declines
Production & Net Export Declines Per Year, Over the Referenced Time Frame, Are Respectively Shown (EIA, Total Liquids)

Saudi Arabia (2005-2008)
-1.0%/year (Prod.) & -2.7%/year (Net Oil Exports)

Norway (2001-2008)
-4.7%/year & -5.1%/year

Iran (2005-2008)
-0.5%/year & -3.4%/year

Nigeria (2005-2008)
-6.4%/year & -6.9%/year

Venezuela (1997-2008)
-2.6%/year & -4.5%/year

Mexico (2004-2008)
-4.7%/year & -13.5%/year

Colombia (1999-2008)
-3.6%/year & -8.3%/year

Oman (2000-2008)
-3.1%/year & -4.4%/year

Vietnam (2004-2008)
-3.5%/year & -46.0%/year

Russia has shown a resumed production decline for only one year, but here are the 2007 to 2008 numbers:
-0.9%/year & -2.5%/year

Some Former Net Oil Exporters
Production & Net Export Increases/Declines Per Year, Over the Referenced Time Frame, Are Respectively Shown (EIA, Total Liquids)

China (1985-1992)
+1.8%/year & -16.9%/year

Indonesia (1996-2003)
-3.9%/year & -28.9%/year

UK (1999-2005)
-7.8%/year & -55.7%/year

Fortunately it is not a bell curve. A real bell curve, a gaussian, will start to drop down real fast. That is conventional statistics, something that doesn't match the real world. The real behavior is what is called the class of "fat-tail" probability distributions, of which the logistic falls. Models such as the shock model can also predict a plateau.

BTW, assumption of gaussian statistics is partly what caused all the problems with credit insurance last year. In that case assumption of gaussian leads to spectacular failure, whereas for oil, assumption of fat-tail leads to a softer landing than we "normally" would assume.

Well maybe :)

I'd be a bit careful here. Prices are set on the margin. Regardless of what future oil production is even if peak oil is still in the future our global economy is based on growth and split into multiple armed governments.

The problem is when the oil supply is no longer sufficient to support the growth of the world economy to support its debt levels. We don't even have to peak to get into serious trouble slow or no growth is sufficient.

The point is the social and economic situation caused by us reaching limits in the rate of increase in oil production are not yet fully understood.

:) more people should listen to memmel...


Out here the strongest opinion seems to be that the problem with the economy is that the "environmentalists" won't let the loggers cut enough trees or the fishermen catch enough fish.

...which is absurd, and can be tested: who are these environmentalists and how did they stop the loggers? at this point your opponent will say "al gore," and you'll ask "what did he do to stop loggers?" "i don't know, al gore made a movie, and he profited from it, so you know he's wrong."

The problem is when the oil supply is no longer sufficient to support the growth of the world economy to support its debt levels. We don't even have to peak to get into serious trouble slow or no growth is sufficient.

Exactly, this is what the establishment refuses to understand. In fact, economic growth is in trouble even with physical production increases because so much of it represents diminishing returns or ... Herman Daly's 'un- economic growth'. The expansion of financials is the best current expression of this.

Unfortunately the outlook for physical production is enmeshed in 'above ground' feedbacks that are impossible to predict. I would say the true production 'curve' would be chaotic. The reductions could be dramatic and swift but pruduction recovery very slow or non- existant. A breakdown in Saudi Arabia (a terrorist attack) would cut back production both in that country but in others as well, that require recycled Saudi oil funds.

One thing that is striking about this article is the reduction in production from last year is shockingly small - (roughly) 2mbpd. This leaves a very small amount of excess capacity. (Considering that the bulk of spare capacity would be an offset to declines elsewhere, plus that 2mbpd idled capacity). @ non- OECD import growth that spare capacity will be gone in a very short time without offsetting declines in imports elsewhere.

$150 oil might be here sooner than people think. Courtesy of the various stimulus packages.

The chaotic events will be mitigated by dispersive forces. Most of the overall trend in discovery and production is explainable by dispersion, which acts as a filter. So any chaotic shocks will likely not force the overall profile to go to the rails. The variability in rates across the world effectively causes the fat tail behavior that absorbs the strongest of the shocks.

Going out on a limb here, however I believe that a lot of people are soon going to be wishing that we were in a state of slow or no economic growth. Especially when it becomes clear that what we are really experiencing is negative growth that it is described by an exponentially negative curve.

Look Ma, I'm shrinking the economy! It's getting smaller and smaller and its doing it faster and faster.


Can anyone with more graphing skills than I have (none) do a running three- or five- year average on the oil production graph so far? It looks like doing so would yield a peak at this point in mid to late '06.

I, too, have been watching the symmetry start to form with a grim sort of fascination, even though I know the ultimate symmetry is not likely to be perfect or gaussian.

Well, here's some charts of simple 12 month moving averages. Spreading the sample over longer periods would distort the picture unduly - although again as I was commenting about Matt's graphs above, 12 is a wholly arbitrary number. But using a full year gives some idea of where things are going I think.



Thanks Dude. As for distortion, I guess depends on what level of analysis one is looking for. I imagine that at this point a five year moving average would not show the decline over the last year. Eventually, though, I think it is only with this kind of analysis that we can pinpoint where the top of the curve was.

Uh oh, we seem to have something of a real Rorschach Test here. jonrw says that the graph looks " more and more like the top of a bell curve with the right half descent beginning to form."

I tried and tried, and looked and looked, and I am sorry, I just couldn't get that...does these graphs really look that to you guys?

It's like those folks that see the Virgin Mary in mildew stains on the ceiling, and if you don't see them, then it means your not devout enough to get the message...

I am convinced of the validity of peak oil (I just don't when it will or whether it has already occured) but honestly I can see NOTHING that would demonstrate it in these graphs...sorry, does this make me a heretic?


In Chemistry the only way to say something for sure, with like 99.9% confidence is to calculate the standard deviation. If a new trendline is forming (aka no longer plateau-ish) 2 data points at a minimum must be out of the bounds of f(x) plus/minus 3 standard deviations. The Reason it has to be 2 data points is because, 1 data point outside 3 standard deviations will fail the F-test and can be discarded.

This is pretty easy to calculate with computers able to do some amazing regression formulas, but it requires the data.

This is pretty easy to calculate with computers able to do some amazing regression formulas, but it requires the data.

It is easy to do the calculation and come up with a number. My experience with statistics is that it is hard to get the correct number.

Normal statistical calculations break down in "fat tail" regions. Two standard deviations may not mean anything in those cases.

Hello Rembrandt,

UAE traders store diesel raising bunker premium

High capacity oil storage tanks in Jebel Ali and Fujairah are following the global trend of storing diesel for sale six to seven months later, market insiders told Emirates Business.

Even though crude oil is no longer in a contango, diesel, one of its distillated by-products, is priced higher by $3 (Dh11) to $6 for contracts due for clearance six to seven months later.

..This has prompted traders to resort to storing diesel. And according to recent reports, this method has substantially increased the bunker premiums (the margin traders make in selling marine fuel) and the ship freight rates.

"Diesel's demand is at its lowest ebb now. It is expected to rise in winter when people, particularly in Europe, need to operate heating systems.
I guess we will see this coming winter how much money people will cough up to keep from freezing and catching the H1N1 flu/pneumonia. If the ongoing Russia/Ukraine foul-up can't get the natgas flowing west, I would expect stored diesel, heating, and bunker oil to get really pricey...

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

"Even though crude oil is no longer in a contango"

Er, yes it is;


The persistence of this contango is sending as strong a message about future oil supply/demand as any number of other indicators.


The persistence of this contango is sending as strong a message about future oil supply/demand as any number of other indicators.

Er, well no, it is sending a strong message about what traders think about future oil supply and demand. Historically traders have been horribly wrong about calling major turns in the market. Traders, in general, simply reflect what the average person in the street believes oil prices will do.

Ron P.

Bingo! This relates to a point I keep stressing on my own site, that we live in reality but respond to our perceptions of that reality. (And sometimes our perceptions are greatly influenced by other peoples' perceptions, which are in turn...)

We can influence our surroundings to some degree, but we can't wish away certain facts the universe insists on, like the amount of recoverable oil in the ground and the effect of rising levels of atmospheric CO2, just to name two off the top of my worried head.

Er, well no, it is sending a strong message about what traders think about future oil supply and demand. Historically traders have been horribly wrong about calling major turns in the market. Traders, in general, simply reflect what the average person in the street believes oil prices will do.

Not quite - they reflect what the average person committing actual money thinks the oil price will do. And, whilst I agree they often get it wrong, placing cash on the table has a way of foccussing research effort!

And it's worth noting that the recent few months of contango have so far been fully justified by the run up in spot (i.e. the traders have got it right this time), despite the recent pull-back. Whether it is more a play on economic recovery or supply issues down the line is hard to unravel without a census of opinion. My suspicion is it is more about the former, but we on here know it is even more justified by the latter ;-)


Some of those futures contracts are going to make somebody out there a LOT of money, for example:

CLQ14.NYM Crude Oil Aug 14 78.69 7:40AM ET 0.00 (0.00%)

$78.69 ?! So this is saying that between now and Summer 2014 the market is predicting an $18 rise in oil?! I gotta get me some of that!


Personally I'd be amazed if by 2014 a) oil is still being traded (primarily) in USD and b) the international trading market is still intact. The scope for black swans over the next few years is phenomenal. BAU seems to be under a great deal of threat.

"$78.69 ?! So this is saying that between now and Summer 2014 the market is predicting an $18 rise in oil?! I gotta get me some of that!"
noutram, would it really be worth the risk? 18 bucks on $60.69 is about a 25% gain, but that's before taxes, before trading commissions and after 5 years of inflation! That is taking a pretty big chance for what would (if everything went well) what would probably be closer to 15% return over 5 years, or less than 3% compounded...you could that on a bond or CD without taking the chances...and oil would only have to drop to 30 bucks to leave you holding the bag (and as if we believe the economy is far from recovery {some folks here on TOD beliefe it is DEAD for good} what are the odds for a rebound in oil prices?

If risk free money could be made on oil contracts everybody would do it...and when every tries to do it, you get a catastrophic bubble and wipeout...have the lessons of a year ago been forgotten already?



Thanks for pointing out that even the UAE is now storing oil products. I still expect the price of oil to drop quite a bit this quarter as I have written before in the Oilwatch Monthly. Seems that the first part of this decline is underway. I don't think we are going to have any natural gas problems with Russia/Ukraine, maybe in January again.

Anyone who has seen recent figures on how much crude oil that is stored on supertankers presently, i.e. crude that is not accounted for in official figures on storage. The latest figures I have seen are from the beginning of June.

Later figures anyone?


Thank you for your effort. This report is very valuable.

Just one question. In your last report (June) it was stated that Non-OPEC liquids stood at 50.29 Mb/d (in May). In the present report it says that this production, excluding biofuels, remained stable at 48.95 Mb/d (in June).

The difference appears to much to be the result of revions. Is there something that has changed? I have not heard that the compostion of OPEC has changed in this period - something I missed? Has it got something to do with what is included in the stated production - something with the biofuels? Or something completely else?


Huge upward revision for Non-OPEC in IEA data (upward of half a million b/d) for April and half of that for May is the cause of this number. I still need to add something about revisions but haven't found a good solution that is workable (doesnt cost much time)

UK, Chinese and US production was revised upwards.


Demand contraction Feb-Apr, from the JODI top 30 consumers data:

Rembrandt - have you compiled all the historic JODI data? Their site doesn't seem to offer data past 02/2008 directly, and extracting all the historic data from .txt or .csv would be a huge amount of work. Does this "Beyond 20/20" browser help?


I have all the historic JODI data back to 2003


Just got off the Morgan Stanley crude analyst call, here is the summary. Raymond James and Goldman also have very similiar positions.

There is currently an oversupply of 650MM barrels causing a temporary glut in the oil market. Demand in China is still a fraction of what the U.S. consumes but will grow very quickly.

Supply will be start to become inadequate and unable satisfy demand growth as new projects will not be able to replace diminishing production and aging fields fast enough starting in late 2010. After that they forecast a consistent shortfall of 2-3mm barrels a day until 2015 and then after that it gets worse. So conservatively if we lose 2 million bbls a day between 2010 and 2015 that puts us at having only 75 million bbls a day available in 5 years down from 85 before this recession.

Iraq potential is limited due to aging fields and an unfavorable geopolitical environment. They estimate Iraq production to peak at 4mm bbls/d

Global warming initiatives (i.e. cap and trade) have not been factored in to their models yet but they estimate them potentially adding a marginal cost of $1.50 to $2 per bbl.

Their estimates on crude prices 12 months out…

Base case: $55
Bear case: $50
Bull case: $90

WC --

Thanks for passing this along. It appears to me that OPEC is holding out for a return to 2008 demand/price around 2013 (i.e. average annual price ~$90/bbl, w/o the spike & crash of 2008).

They are hoping the developed world market can accommodate $90/bbl oil by then. 2013 is a ways away, but I have my doubts.

When they say there is a consistent shortfall of 2-3 mbl a day I don't think they mean it is cumulative. Instead, we need 85mbl this year, can produce 83; next year we need (demand) 87mbl, can produce 85 etc They aren't thinking peak oil, they're thinking temporary undersupply....

Possibly. Still, this is a pretty grim picture to be coming out of such mainstream sources. It doesn't say anything about them seeing any kind of major economic recovery during this time, so they might in fact have diminishing demand already factored in.

Good point, although they didn't come right out and say it they did mention specifically field depletion. I think they meant a combination of both increased demand and field depletion that leads up to the total 2-3mm bbl/d gap.

They also discussed how this will lead to reduced CAPEX budgets for E&D thus exacerbating the problem. I think the Majors/Integrated sector is going to be significantly challenged in growing production and satsifying the street in this scenario. They will most likely have to grow through acquisitions of nat gas independents in the U.S. and abroad.

They are predicting peak oil because they say:

[quote]... as new projects will not be able to replace diminishing production and aging fields fast enough starting in late 2010....[/quote]

That article is so great! Thanks for sharing it into us. I’ve learned something new. But aside from that breaking report let me share something new concern to you, nowadays. Video games have been pilloried since the dawn of the technology, and the criticism has only intensified since the late 90s, when Mortal Kombat and parents decried the violence, and then Grand Theft Auto and Postal only made the clamor noisier. However, the danger of addiction to video games is real – young adults are increasingly cutting themselves off from real world contact and interaction, and the consequences are very real – there aren't cheat codes for estrangement from loved ones. Video game detox centers do exist, and they're popping up all over the globe. It is worth same day payday loans and potential freak outs to make sure you and your loved ones don't take video games too seriously.

Grand Theft Oil !!!!

..young adults are increasingly cutting themselves off from real world contact and interaction..

And can you really blame them?

Don't feed the trolls, or in this case, the spammer.

As far as general resource depletion goes, there is a bit of misunderstanding present in the area, ill quote Rothbard( http://mises.org/rothbard/newlibertywhole.asp ) to explain how capitalism solves any problems concerning the general Peak Oil theme:

Conservation of Resources

As we have mentioned, the selfsame liberals who claim that we have entered the "postscarcity" age and are in no further need of economic growth, are in the forefront of the complaint that "capitalist greed" is destroying our scarce natural resources. The gloom-and-doom soothsayers of the Club of Rome, for example, by simply extrapolating current trends of resource use, confidently predict the exhaustion of vital raw materials within forty years. But confident — and completely faulty — predictions of exhaustion of raw materials have been made countless times in recent centuries.

What the soothsayers have overlooked is the vital role that the free-market economic mechanism plays in conserving, and adding to, natural resources. Let us consider, for example, a typical copper mine. Why has copper ore not been exhausted long before now by the inexorable demands of our industrial civilization? Why is it that copper miners, once they have found and opened a vein of ore, do not mine all the copper immediately; why, instead, do they conserve the copper mine, add to it, and extract the copper gradually, from year to year? Because the mine owners realize that, for example, if they triple this year's production of copper they may indeed triple this year's income, but they will also be depleting the mine, and therefore the future income they will be able to derive from it. On the market, this loss of future income is immediately reflected in the monetary value — the price — of the mine [p. 248] as a whole. This monetary value, reflected in the selling price of the mine, and then of individual shares of mining stock, is based on the expected future income to be earned from the production of the copper; any depletion of the mine, then, will lower the value of the mine and hence the price of the mining stock. Every mine owner, then, has to weigh the advantages of immediate income from copper production against the loss in the "capital value" of the mine as a whole, and hence against the loss in the value of his shares.

The mine owners' decisions are determined by their expectations of future copper yields and demands, the existing and expected rates of interest, etc. Suppose, for example, that copper is expected to be rendered obsolete in a few years by a new synthetic metal. In that case, copper mine owners will rush to produce more copper now when it is more highly valued, and save less for the future when it will have little value — thereby benefitting the consumers and the economy as a whole by producing copper now when it is more intensely needed. But, on the other hand, if a copper shortage is expected in the future, mine owners will produce less now and wait to produce more later when copper prices are higher — thereby benefitting society by producing more in the future when it will be needed more intensely. Thus, we see that the market economy contains a marvellous built-in mechanism whereby the decisions of resource owners on present as against future production will benefit not only their own income and wealth, but the mass of consumers and the economy as a whole.

But there is much more to this free-market mechanism: Suppose that a growing shortage of copper is now expected in the future. The result is that more copper will be withheld now and saved for future production. The price of copper now will rise. The increase in copper prices will have several "conserving" effects. In the first place, the higher price of copper is a signal to the users of copper that it is scarcer and more expensive; the copper users will then conserve the use of this more expensive metal. They will use less copper, substituting cheaper metals or plastics; and copper will be conserved more fully and saved for those uses for which there is no satisfactory substitute. Moreover, the greater cost of copper will stimulate (a) a rush to find new copper ores; and (b) a search for less expensive substitutes, perhaps by new technological discoveries. Higher prices for copper will also stimulate campaigns for saving and recycling the metal.This price mechanism of the free market is precisely the reason that copper, and other natural resources, have not disappeared long ago. As Passell, Roberts, and Ross say in their critique of the Club of Rome: [p. 249]

Natural resource reserves and needs in the model are calculated [in] . . . the absence of prices as a variable in the "Limits" projection of how resources will be used. In the real world, rising prices act as an economic signal to conserve scarce resources, providing incentives to use cheaper materials in their place, stimulating research efforts on new ways to save on resource inputs, and making renewed exploration attempts more profitable.6

Don't use copper as an example. Copper can be recycled.

Use passenger pigeons or fossil fuel as an example and try again.

That is only a technical difference. The basic principle of owners being incentivised to keep capital value and future profits works the same way, just means even more saving and less producing if the technicals become more grim.

Owners will work to get more profit over time, and if saving and pumping out less oil leads to that, which it will with the danger of decreasing supplies, then thats what they will do.

it's funny seeing these kinds of posts on this site from time to time. let me just say i completely second the "liberal" notion that "capitalist greed is destroying our scarce natural resources."

you're not addressing any pertinent facts surrounding oil depletion. you're not addressing exponential population growth. you're simply asserting that an economic theory (and a theory that has many historical counterexamples, i might add) is the strongest force in the world.

you must be uneducated about peak oil. i'm sure that if you had a chance to learn more about it, you're excessive quoting of rothbard (the phrase 'capitalism solves any problems' is milk-sneezing) would make you begin to feel quite embarrassed. i think most people visiting this site have been through this before, many times.

Yes, the scale of the problem is undoubtedly huge. And that is all the more reason why capitalism is the only method of solving it.FOr once, the economic calculation problem http://mises.org/humanaction/chap26sec1.asp would crush any alternative, especially in an environment where energy is very scarce.

I think you misunderstood the point: greed leads toward trying to keep capital value as well as income. Without capitalism(private ownership of means of production), the first wont simply exist. No capital ownership -> no one is directly incentivised to keep that capital's value, and instead will waste it for personal profit, just like we have with water pollution, air pollution. WHereever there are problems in an economic sector, you can be sure that interventionist or socialist policies are involved. Politicians are just as greedy as anyone else, just know how to hide it better.

Not everyone needs personal profit for motivation in making the world a better place. Perhaps one day humanity will wake up and realize that capitalism is the greatest Ponzi scheme ever established.... Lets hope it's not to late.

Personal profit is the ONLY thing that guides human action, the trick is only that personal profit is subjective, defined by the individual acting, which makes it hard to rationalise sometimes.

Its praxeology, the foundation of economics.
Decisions are made on an hierarchical basis. That is, it is impossible to carry out more than one action at once, the conscious mind being capable of only one decision at a time — even if those decisions can be made in rapid order. Thus man will act to remove the most pressing source of dissatisfaction first and then move to the next most pressing source of dissatisfaction.

Progressive politics solved the pollution problem. If we were left to free-market capitalism we would still be sitting in a blackened atmosphere and up to our waste in crap.

True. However socialism is no alternative either. There are alternatives to both capitalism and socialism, but few people can make a valid point about them. Major economic theories are hard and complex to understand. Culture also plays a huge role in social/economic standards. This social and political organization is the reflex of this mainstream culture, more or less influenced and promoted by the powers. All this mass of cultural paradigms can make us blind to alternatives, and originates a lot of dogmas in modern economic theory. Our "life paradigm" has to change. There are certain facts about the universe that are incompatible with this model of economic growth, and are not going away just on wishful thinking.

Recently I've seen news about an event in Estonia which can give a glimpse of how things could be diferent... and much better!


Cooperativism as opposed to competitive philosophy has valid point, it's better in ethical terms, social, economical, etc. If they, in Estonia have done it by the capitalistic way they would have spend a lot more money, and they haven't use the socialist repression either. In the end everyone was proud and felt useful about a job well done.