Tuesday, June 24, 2008

Fact: Crude Oil Supply and Demand

It takes me a while to finally get hold of this chart about worldwide supply and demand. Non-Opec reduced their supply while Opec going for full steam, unfortunately this created a very tight match between supply and demand.

The chart also tells us the second ramp up of demand from 2003 was a lot steeper than the first phase from 1992. The first slope rise was like 1% per year but the second slope was almost 2% per year, unfortunately supply was almost flat from non-OPEC producers. Luckily, Opec members picked up the slack. This still opened up the doubts whether Saudis are running out of oil since they are unable to response, traders are still skeptical now about Saudis' long range plan to produce 15 million barrel a day. The previous record output at full throttle was 11-12 million barrel per day.

World's demand is 86 million barrel per day, if the world can slow down by 1% and oil producers can produce an additional 1 million barrel per day, we can have about 1.9 million barrel per day spare, the world will be able to respond better to geo-political events and natural disasters.

Let me end this entry with two quotes. I think a skeptic will remain skeptical, a believer will have stronger faith. Which camp am I in?

"The bubble is superimposed on an upward trend in oil prices that has a strong foundation in reality," said Soros.

"Statistics are no substitute for judgment."
-Henry Clay

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