OPEC August 2024 Update – Peak Oil Barrel

The OPEC Monthly Oil Market Report (MOMR) for August 2024 was recently published. The last month reported in most of the following OPEC charts is July 2024, and reported production for OPEC countries is crude oil production in thousands of barrels per day (kb/d). In the OPEC charts below the blue line with markers is monthly production and the thin red line is the trailing twelve month average (CTMA) production.

June 2024 production was revised lower by 4 kb/d and May 2024 production was revised higher by 8 kb/d compared to last month’s report. OPEC 12 production increased by 185 kb/d, with most of the increase in production coming from Saudi Arabia (97 kb/d), Iraq (57 kb/d), Iran (20 kb/d), Nigeria and the United Arab Emirates both increased crude oil production by 16 kb/d, Libya saw a decrease of 19 kb/d.

The chart above shows the production of the 4 major OPEC producers that are subject to production quotas (Saudi Arabia, UAE, Iraq and Kuwait) from the post-pandemic peak in 2022, where it reached the 12-month production average (CTMA) of the Big 4. 20849 kb/d, crude oil production was reduced by 2216 kb/d from the 2022 CTMA peak at 18633 kb/d. Potentially, the Big 4 could have around 2200 kb/d of spare capacity when world demand calls for increased production.,

In the monthly OPEC oil market reports in recent months, they have focused more on the OPEC+ group of nations, which they call the DoC, which refers to the Declaration of Cooperation that led to the creation of OPEC+. The graph above shows the DoC C+C output as reported by the EIA, this is different from the numbers reported in the MOMR which are only raw. Since 2010, the long-term trend in DoC production has been an annual decline of 165 kb/d. The last month reported on this chart and some of the charts that follow is April 2024, which is the most recent international EIA data. In the last 7 months, DoC production has stabilized around 45000 kb/day. Much of the decline in 2016 was due to US sanctions on Iran and Venezuela.

The graph above shows the trend for the rest of the world (ROW), i.e. those countries that are not part of OPEC+, the average annual C+C production increased by about 568 kb/d from 2010-2024. How much of this growth came from lower US oil production?

All of the growth in ROW C+C production from 2010-2024 was from US tight oil production, as can be seen in the chart above for ROW C+C minus US crude.

This chart shows OPEC Big 4 C+C production from 2010-2024 (previous chart was crude only). Production fluctuates a lot due to OPEC trying to balance world markets, but the long-term trend is an annual increase of around 200 kb/d with a few short periods where production has increased by as much as 2000 kb/d in a year. Of some concern is the likely slowdown in future US oil production, where most of the increase will have to come from OPEC+. I expect either a plateau or very slow growth (100 kb/d less) in future US oil production.

The recent trend for ROW minus tight oil C+C from May 2021 to April 2024 is an annual increase of 819 kb/d, this may be due to increased C+C production in Canada, Brazil, Norway, Guyana and Argentina.

OECD stocks remain below their 5-year average, global oil markets appear fairly balanced and oil prices remain at reasonable levels, with Brent futures currently below $80/b.

World demand estimates for 2024 and 2025 have been revised down by 200 kb/d compared to last month, the estimates are significantly higher than EIA estimates for world demand in 2024 and 2025. Supply estimates from non-DOCs remain the same as last month . . If world oil demand is as high as OPEC forecasts, the world may struggle to meet demand in 2025, although it seems likely that OPEC’s 2025 world liquids demand is at least 1 Mb/d too high. If I am right, then the world will have an adequate supply of oil in 2025.

OPEC’s forecast for reduced oil growth in 2024 and 2025 is likely too high, my expectation is that total US oil increases from 2023 to 2025 will be about half of OPEC’s forecast and perhaps less if EIA’s oil and natural gas price estimates the price forecasts for 2024 and 2025 are correct.