Thursday, June 06, 2013

Too Much Oil

Below is an abstract from EIA's latest report on fossil fuels:

  • World liquid fuels consumption grew by 0.7 million bbl/d in 2012 to reach 89.0million bbl/d. The consumption is falling in OECD but rising in emerging world.
  • non‐OPEC liquid fuels production will increase by 1.1millionbbl/d in 2013
  • Projected OPEC total supply falls by 0.5million bbl/d in 2013 and then rises by 0.1million bbl/d in 2014. Most of the decline in 2013 comes from Saudi Arabia in response to non‐OPEC supply growth, while Iraq and Angola account for most of the increase in 2014.
  • EIA expects U.S. crude oil production to rise from an average 6.5 million bbl/d in 2012 to 7.4million bbl/d in 2013 and 8.2million bbl/d in 2014.
  • Since reaching 12.5million bbl/d in 2005,totalU.S. liquid fuel net imports, including crude oil and petroleum products, have been falling. Total net imports fell to 7.4million bbl/d in 2012, and EIA expects imports to continue declining to an average of 5.7million bbl/d by 2014.
  • Similarly, the share of total U.S. consumption met by liquid fuel net imports peaked at more than 60 percent in 2005 and fell to an average of  40 percent in 2012. EIA expects the net import share to fall to 30 percent in 2014, which would be the lowest level since 1985.
The report suggests that man has conquered yet another peak, "the Peak Oil". Today the world is awash with black barrels. Production from the unconventional fossil sources viz. Oil Shales & Tar Sands, is now at full swing. Guess, what would have happened if the sanctions had not been imposed on Iran?

In response to high oil prices, USA has been able to cut its oil imports appreciably. USA economy and dollar have greatly benefited from the current reversal of its current account deficit.

But on the other hand, China & India have not been able to control their appetite for crude imports. In face of the continued rising demand, these countries have not been able to find the desired alternate indigenous supply solutions. These countries are losing a large portion of their foreign reserves on imports of crude oil. Specially, the Indian rupee has come under a lot of pressure and depreciated to a great extent.  Whereas, China is working hard to harness renewable energy resources like wind and sun, India has not yet shown any urgency or will.  Probably, seeing the tiger(USA) having moved away from the pond(ME Gulf), buffalos (India) are complacent and over-confident of un-interrupted supply.

Oil Prices
Demand-supply fundamentals are weak but strategically world can not afford cheap oil now.  We expect to see a range bound movement in oil prices over short to medium term.

There are not just enough tonne-miles to support the world fleet expansion. Going by the above report, 2014 does not spell hope but doom for the dirty tanker owners.   

Note: Notwithstanding the positive results of the recent exploits to boost the oil supplies, the exploit of unconventional resources like shale and sand is having a negative impact on the environment. The heat and tremor of which will be felt sooner or later. 

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