The view from OPEC

I was struck, reading this month's OPEC monthly oil market report (pdf file) both by the degree of optimism that it contains, and the way in which they apparently see the world market.  As the report is structured, the presentation suggests that OPEC looks at the world production from elsewhere, compares it with the demand, and makes up the difference.

Put in words, their estimates are

On a quarterly basis, non-OPEC supply is expected to average 50.7 mb/d, 51 mb/d, 51.6 mb/d, and 52.9 mb/d in the first, second, third and fourth quarters, representing an upward revision of 99,000 b/d in the first quarter, downward revision of 285,000 b/d in the second, upward revision of 248,000 b/d in the third and 258,000 in the fourth.

They then compare this with demand.

Perhaps the most significant of which is that for China. That perhaps can be seen by looking at their graph of Chinese demand in recent times.

By then comparing this to supply they derive the needed production from OPEC.

Putting that into words:,

The estimated demand for OPEC crude in 2005 has been revised to 28.8 m/d, representing an increase of 0.6 mb/d from last year and a revision of 0.1 mb/d. In 2006, the demand for OPEC crude is expected to average 28.5 mb/d, representing an upward revision of 0.1 mb/d versus the previous month. On a quarterly basis, the demand for OPEC crude is expected at 29.9 mb/d in the first quarter, 27.8 mb/d in the second, 28 mb/d in the third and 28.3 mb/d in the fourth, representing an upward revision of 0.4 mb/d in the second quarter and a negative revision of 0.1 mb/d in the third. Preliminary data shows that there was an inventory draw of 0.25 mb/d in the first quarter of 2006.
(The last sentence is rather curious).

The report contains some interesting side comments, for example on Russia:

In April the new tax duty came into force for crude exports which may
affect some producers, particularly those that depend on rail exports. It is interesting to notice that despite the level of oil prices seen this year, recent drilling statistic shows that drilling footage is down 7% year on year in January, mainly due to the cold weather, but the trend over the last several months also shows a slight negative/flat slope for the growth in drilling footage, which correlates well with the slowdown in the rate of production growth seen recently.

And their prognostication for the  United States may be a little optimistic, at least for the GOMEX.

US oil supply is expected to average 7.4 mb/d in 2006, an increase of 130,000 b/d versus 2005, but slightly lower versus the last assessment. On a quarterly basis, US oil supply is expected to average 7.2 mb/d, 7.4 mb/d, 7.4 mb/d, and 7. 7 mb/d in the first, second, third, and fourth quarters respectively. The revision reflects a slightly worse expectation for the recovery of the US GoM in 2Q06 and 3Q06. Assumed GoM losses in 2Q06 have been adjusted to 280,000 from a previous estimate of 200,000 b/d while for 3Q06 losses are now assumed at 100,000 b/d compared to a previous 50,000 b/d. Additionally, 50,000 b/d of permanent losses are not expected to recover in 2006, an assumption that remains unchanged. The main fields that are currently shut down include Mars (140,000 b/d), Typhoon (40,000 b/d), and K2 (15,000 b/d).

The second reason for the revisions is related to the problems in Prudhoe Bay gathering centre No 2, which averaged 100,000 b/d in March. Some of these losses will extend into April, but recovery is under way with over 70% of the lost output back on line.

And in terms of  non-OPEC supplies in general, again there is perhaps a little optimism:

In the first quarter of 2006 average losses related to unplanned shutdowns, deeper maintenance, weather impact, accidents, and strikes are estimated at 1 mb/d in January and 0.6 mb/d in February and March, the bulk of which is concentrated in the OECD. In April, early indicators suggest that total affected production may be larger than in March, but this is expected to be offset by increases elsewhere, underpinned by strong growth in non-OECD. Prudhoe Bay is likely to produce around 30,000 b/d below capacity, Ecuador is still facing challenges in restoring full output due to damage to the export pipelines and strikes, while in Angola the 200,000 b/d Girasol development will be offline for an extended period of time in April/May to under go maintenance and technical upgrades. In Norway, the latest maintenance schedule also suggests that some 300,000 b/d will be out for the month, much higher than previously anticipated. The US GoM is also not expected to see any significant improvement.

There is a wealth of other data on pipeline flow rates, tanker movements and the like, which space and time preclude me commenting on - but which are worth a read, if you have not been there before.

This is how the DoD sees it :

DoD Broadens Energy Efficiency Focus
including consideration of an all-nuclear Navy.,15240,94739,00.html


Buried in that article is Bartlett's point that it makes sense for the Amphib carriers like our BATAAN Marine carrier (the smaller carriers that carry helicopters and harriers). Possibly/probably some of the large transports and the like could qualify for Nuke engines, but the navy is having a difficult problem with rapidly escalating costs and a lack of numbers in total ships.

At least they are talking about it.

What happens if, say, a nuclear powered amphibious carrier, is crusing in, say, just for example, the Persian Gulf towards, say, Iran, and hits a mine or is torpedoed and sinks.  Will it maybe, say, destroy all life within several hundred miles?
Most likely it will remain like our subs and the Soviet subs that were lost in the Cold War, like the THRESHER, at the bottom of the sea. Ocean water pressure tends to keep the ships together, which is why you do not see the TITANIC littered over the ocean bottom for hundreds of miles.

If the nuke plant on board was hit directly and it shattered, it would spread out some more.

All the more reason for the good guys to win and the bad guys need to lose!

Think of it as an underwater exposed uranium deposit.

well, what if that amphibious nuclear vehicle hit a mine while it was scurrying across the sands of some such mid-eastern nation?  how well protected are the nuclear components?

The main protection of our larger warships is precisely that. They are large. So it would come down, in my mind, to two things.

  1. where did it hit/explode? If it is the bow, not unusual for a mine, the power plant probably stays intact and the ship survives.

  2. a hit that is amidships and goes deep into a warship, such as from a missile, like the Sunburn, the damage is much worse.

And of course, one of the worst things the USN is at is mine-clearing and most damage since the end of WWII to our warships has been from mine related type stuff. I forget the exact figure but it is like 15 our 19 damaged warships since the end of WWII has been due to mine-related weapons.

Armor plate is out of fashion these days.

There is the factor here that our older ships were built with the wrong material (light weight stuff that gets hot easily and burns too) while the newer warships are supposed to be better.

But you still run the risk of nuclear contamination. But it is not the end of the world.

One final thought, the size of crews on the new ships, especially those being built right now, have small to tiny crews compared to the old days. Less hands to do damage control. . . . it is a factor being debated in the halls of Washington and the Pentagon.

A comment on the radio two days ago was the president of OPEC saying that it would be five years before production went up and prices came down. I think production will tick upward in 3-7 years with so much investment in new drilling and exploration. Significant up tick? no.
Interesting that Angola is already China's leading supplier, because Angolan oil is so light and sweet, and refinery capacity for heavy sour is lacking there.
As to OPEC, the report offers no new information whatsoever. It does not repeat the bombastic promises of some member states.
Well, my interpretation of the first graph (table 28) in this post is that for 1Q06 world demand has been 250,000 bd higher then production.
Thus the .25 mb/d "inventory draw."
I noted that, thanks. Other very interesting numbers in the graph is the non-Opec production number for 1Q06 being 55.03 mbd, but their projection for 4Q06 non-Opec production is a solid 2.5 mbd more, 57.53 mbd.
Well, the ACG project in Azerbaijan is coming through, and Angola is still expected to do so by then. But there are some very rosy scenarios regarding the US and North Sea in that fourth quarter number.
Why is there regularly that huge drop between the first and second quarter?
I think it's just a slack time of year.  Winter heating is over, summer driving not yet begun.