Oil Supply Update

Stuart at Early Warning has returned with one of his once monthly oil supply updates - Oil Supply Update.

Nothing very dramatic happened in the last three months: supply continued to inch up, and prices are a little lower than during most of the last couple of years, but $100 remains an effective floor for Brent ...

This last picture shows also (green line) the narrower definition of oil given by "Crude and Condensate", which has been flatter than the "all liquids" represented by the black line.

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The exploding supply of NGLs can this stuff be called oil

John Kingston at "The Barrel" has a post on the growing production of natural gas liquids - The exploding supply of NGLs: can this stuff be called oil?.

If The Oil Drum were still around, the contributors would certainly be talking about a new ESAI study.

The Boston-based consultancy put out a press release today, touting a new report it has produced that says by 2023, NGL production will account for more than one-quarter of the world’s liquids output.

To which the peak oil believers might say: exactly.

One argument often made by the peak oil school is that the rise in liquids output around the world does not eliminate any suggestion that oil production has peaked, because so much of what is coming out of the ground isn’t really oil. Instead, much of it is NGLs, which are far less versatile in what can be produced from them. Specifically, they have virtually no value in making distillates, the oil product most in demand in rising economies.

an increasing supply of natural gas from areas as diverse as the Middle East and Australia is pumping out a lot of NGLs along with that rise, and that’s adding to the percentage of NGLs in the total world liquids pool. You can see it in the price: NWE propane now runs about 60% of the price of Brent, and in 2008, it averaged close to 70%.

The question for the global market is whether innovation can take some way of making what could be a growing surplus of ultra-light petroleum products like NGLs or condensate and figure out a way to help them satisfy other petroleum demand. The rising supplies of these types of ultra-light petroleum feedstocks is great news for the petrochemical industry, particularly in the US, but it does take something off the ebullience of those proclaiming the end of peak oil. All barrels most certainly are not alike.

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2012 Global Fuel Supply Still Flat

Stuart at Early Warning has a look at global oil production trends - 2012 Global Fuel Supply Still Flat.

I seem to be the only person paying much attention to this, but I still think its significant. May figures for global liquid fuel supply are out from OPEC and the IEA and they continue to show that global supply has increased very little since January (in contrast to the very strong increases in the second half of 2011).

Other things being equal, we would expect this to lead to rising prices. Instead, prices have been weak/falling as a result of Eurozone fears. The fears about the eurozone are legitimate, but still, at present the global economy has got to be growing, if a little weaker than normal. Only Europe is actually contracting at present and that mildly. Thus, if the fears do not translate into much more pronounced global contraction in reality fairly soon, oil prices could jump up quite a bit. On the other hand, of course, if Europe does turn into a full-blown financial crisis then they could fall further.

There is a strong Schrodinger quality to the oil markets at present: prices are a superposition of the state in which Europe turns into a major global financial crisis, and the state in which it doesnt. I wonder how long before the measurement is made?

Stuart also has a look at oil production in Iraq and some of the dodgy reporting of production trends- Is "Soaring" the Right Word Here?.

Ten days or so ago, I posted the graph above under the headline "Sharp Uptick in Iraqi Production". I chose my words carefully - "uptick" to indicate that this was a movement upward of the same general order of magnitude as other recent movements in the time series, and "sharp" to emphasize that, as upticks in Iraqi production go, this was a somewhat larger and faster one than has been typical (but not, in my judgement, so great as to make the use of "uptick" misleading).

Yesterday, the New York Times decided to report on the same development under the headline "Oil Output Soars as Iraq Retools":

BAGHDAD — Despite sectarian bombings and political gridlock, Iraq’s crude oil production is soaring, providing a singular bright spot for the nation’s future and relief for global oil markets as the West tightens sanctions on Iranian exports. ...

I dont object to the graphic. Nor of course do I disagree that Iraqs production has increased and is likely to increase further (Ive been covering this for a long time).

But I do really question whether the sober grey-lady paper-of-record should refer to an increase of about 300kbd above the level of last fall as "soaring" in the present tense. I dont think so. I think "soaring" carries a strong connotation of already being way up in the air, or ascending very materially and rapidly. I dont think 300kbd merits that term. I think, if we wanted to use a flight metaphor, we might reasonably say "has begun to take off" or even "looks set to soar". But I think the use of "soaring" in the present tense is an exaggeration. I think this fits in a long-standing pattern at the New York Times of distorted coverage in which positive oil market developments are over-hyped while negative ones are minimized.

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