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Page added on February 25, 2016

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Oil Price And Its Effect On Production

Oil Price And Its Effect On Production thumbnail

The JODI Oil World Database came out a few days ago. The data is through December 2015. The JODI C+C production numbers differs somewhat from the EIA numbers. The JODI OPEC numbers are crude. Also there are a few very small producers that do not report to JODI so their numbers will be slightly less than the EIA. But otherwise they are pretty accurate.

Also, JODI, for some reason, does not count all of Canada’s oil sands production. So for Canada I use Canada’s National Energy Board numbers instead.

The JODI C+C numbers, for Non-OPEC, will average about 2.4 million barrels per day less than the EIA. This is largely due to some countries not reporting to JODI. But these countries only have small changes in their overall production so would have little effect on any of my charts or calculations.

JODI World C+C

According to JODI, world crude oil production peaked, so far, in July and has declined by 339,000 barrels per day.

JODI Non-OPEC

The recent price collapse has had a greater effect on Non-OPEC production than OPEC production. Non-OPEC production peaked, so far, in December 2014 and in December 2015 stood at 650,000 bpd below that peak.

JODI Russia

No discussion of Non-OPEC production would be complete without Russia, Non-OPEC’s largest producer. I would never claim, just by looking at the chart, that Russia is peaking, or has peaked. But there have been reports coming out of Russia for over two years now that Russia is peaking. Some of those reports like this one Global and Russian Energy Outlook to 2040 have been reported on this blog. I think the charts lend strong credence to those reports.

Note: Russian data, prior to 2012, is from the EIA. Beginning January 2012, JODI changed its Russian reporting methods but did not change its historical data, showing a huge decline in production beginning in 2012. So for more accurate historical data prior to 2012, EIA data is used.

But, by far the largest gains in Non-OPEC production has come from the USA and Canada.

JODI US & Canada

Notice how close a chart of US and Canadian production resembles a chart of Non-OPEC production itself. In fact….

JODI Non-OPEC with US & Canada

I think this chart is amazing. Non-OPEC, left axis and US + Canada, right axis. There is 31,000 bpd difference in the scale but the difference in the scale lines for both axis is exactly the same, 1,000 bpd per line. From January 2005 until December 2015, all Non-OPEC was up 5,144,000 barrels per day. During that same period US + Canada was up 5,222,000 bpd, meaning during that 11 year period, Non-OPEC less US and Canada, actually declined 78,000 bpd.

That number, -78,000 bpd, is even more remarkable due to the fact that this includes Russia, who’s production during those 11 years was up 1,192,000 barrels per day.

JODI Non-OPEC less USA & Canada

Here is a chart of Non-OPEC less US and Canada. Notice that the first point on the chart, January 2005, sits right on the 31,000,000 bpd line and ends up, on December 2015, at just below that point.

Non-OPEC less US and Canada peaked in January 2011 and in December 2015 had declined almost exactly 1.5 million barrels per day from that point.

JODI Non-OPEC less US & C + Price

Non-OPEC production did not drop because of the price, it dropped despite the fact that world oil prices averaged $105 per barrel for most of that period. That is not to say that the price of oil played no part in production levels during that time. They almost certainly did. It is likely that production would have fallen much further had not oil prices been so high.

There is no question that Non-OPEC, less US and Canada, peaked in January 2011. Rising prices brought with it rising production. Production, during that six year period from January 2005 to January 2011 rose just under 1.5 million barrels per day among Non-OPEC nations less US and Canada. And just where did that increase come from?

The two charts below show production change. Countries with little or no change are not shown.

Non-OPEC Change 3

During that six year period Non-OPEC production increase came primarily from Russia, Oman, China, Brazil, Azerbaijan and Canada. USA was just one of the also rans during this period. The big declines in Non-OPEC production, during this period, came primarily from the North Sea and Mexico.

Non-OPEC Change 1

The above chart shows what happened to Non-OPEC production during the longest period of very high oil prices in history.

This chart shows the change from the peak in January 2011 to December 2015 of Non-OPEC countries less USA and Canada. Notice the minor roles Russia, Brazil, Colombia, Oman and China played in the last five years. Their increase in production is outweighed by those on the declining side of production.

$105 oil was not able to sustain their growth but it was, very likely, able to slow the decline of some of those nations.

Conclusion

Non-OPEC oil production, less US and Canada, will continue to decline. That decline will now be accelerated due to cancelled projects brought on by very low oil prices. The oil production from US and Canada will also now begin to decline. The decline from Canada will be slight, if any, but there will definitely be much slower growth in Canadian oil production. The decline US crude oil production will be significant.

The decline in total Non-OPEC crude plus condensate production, that begun in mid 2015, will continue at a slightly accelerated pace. Prices, high enough to make a significant difference, will not likely return until at least mid 2017. Then, beginning in 2018, growth in US production will likely return but at a much slower rate than in previous years.

OPEC is a different story. Iran will, very likely, increase production by about 600,000 barrels per day over the next 12 to 18 months. Iraq may increase production slightly but not nearly as much as Iran. And any increase in Iraqi production will be erratic. And Iraq still has a strong potential for political disruption. The rest of OPEC will show a decline in crude oil production. And any total increase in OPEC production will not be nearly enough to offset the decline in Non-OPEC production.

2015 will be the year world production of crude oil peaked. The return of higher oil prices, whether later this year or further in the future, will not bring production back to the 2015 level.

Peak Oil Barrel by Ron Patterson



25 Comments on "Oil Price And Its Effect On Production"

  1. Nony on Thu, 25th Feb 2016 11:26 am 

    1. Good analysis of the non OPEC production. The division into different groups illuminates the changes.

    2. I like the Ron has walked back from the Russia peak calling, but he sure as hell has done so in the past. He has a tendancy to act super confident when he has limited data. Similarly, he didn’t understand the TX RRC adjustments at first and similarly he tried to say average well quality in ND was going down.

    3. Prediction on OPEC is difficult and Ron just makes assertions here about Iran and Iraq. He doesn’t have supporting analysis and in any event even for experts it is uncertain. Also SA and Libya remain wild cards.

  2. Truth Has A Liberal Bias on Thu, 25th Feb 2016 11:32 am 

    “Ron just makes assertions”, and you would never do that would you Nony? Not your style is it? Fucking retard.

  3. Ron Patterson on Thu, 25th Feb 2016 12:01 pm 

    Nony, I have not walked back my prediction that Russia is at peak. All I did in the post was just agree with reports coming out of Russia… that Russia has peaked.

  4. PracticalMaina on Thu, 25th Feb 2016 12:27 pm 

    Melting permafrost is tough to frack?

  5. Nony on Thu, 25th Feb 2016 12:53 pm 

    “I believe Russia has peaked and will likely be down about 3% this year from their December 2013 peak.”

    [Peakoilbarrel.com; Proven Reserves, IOCs and Other News; by Ron Patterson Posted on 05/02/2014]

  6. Apneaman on Thu, 25th Feb 2016 12:59 pm 

    Nony lies. Liar.

  7. Nony on Thu, 25th Feb 2016 12:59 pm 

    “But with over 60% of their production still coming from Western Siberia’s giant, largely depleted, fields it looks like that long overdue decline may have finally arrived.”

    “But with very little new oil coming down the pike, and infill drilling in their old giants beginning to peter out, it looks like the long expected decline in Russian oil production has finally arrived.”

    “One does not have to wait for a downward trend to predict the peak. No definite trend has yet been set but nevertheless I AM PREDICTING THAT RUSSIA IS CURRENTLY AT PEAK.” (emphasis added)

    peakoilbarrel; “Jodi versus EIA” (May 2014)

  8. Nony on Thu, 25th Feb 2016 1:05 pm 

    (Not Russia, but showing more Ron bad peak calls)

    [2010 at The Oil Drum]

    “Well I am of the opinion that we are at peak right now and have been since 2005. The difference in any year is within the margin of error. There may be a month, or even a year that tops 2005 and/or 2008 but the difference will be so small that it will mean nothing. I believe that by 2016 we will be declining at between 1 and 2 percent per year and it will be quite obvious that the world is post peak.”

    We are not “obviously” post peak. And not declining 1.5% per year.

  9. Nony on Thu, 25th Feb 2016 1:10 pm 

    “The US has brought several new Gulf of Mexico projects on line late last year and early this year and they are just now spinning up to near full production. I expect US production to reach a post Katrina peak in late 2009 and begin a slow decline next year as far fewer GOM projects are scheduled for 2010 and later.

    Russia reached a new post Soviet Union peak in August and is holding that level through November. November may even be a little higher than August. That however is all about to change but not until next year.

    Russia 2010 oil output to fall -Bernstein analysts (blurb follows)”

    [Darwinian on November 23, 2009 – 10:51am]

  10. Nony on Thu, 25th Feb 2016 1:25 pm 

    “I am betting big money that 2014 will be the all time peak for Russia.”

    [EIA Update, March Production Numbers,
    by Ron Patterson Posted on 07/08/2014]

  11. Nony on Thu, 25th Feb 2016 1:40 pm 

    “Second Russia, whose production increase of over 1.5 million barrels per day over the past ten years has kept us on this bumpy plateau, is now in decline.”

    [Anticipating the Peak of World Oil Production by Ron Patterson Posted on 07/26/2014]

  12. Nony on Thu, 25th Feb 2016 1:44 pm 

    “Russia, the largest producer of crude oil in the world, will peak in 2014. There are various estimates of how fast their production will decline but best case, for Russia, puts their decline at about 2% per year. They say they are depending on the Bazhenov Shale and Arctic offshore just to keep production flat in 2015. Well that is not going to happen, not in the next few years anyway. And if prices stay in the current range it is unlikely to ever happen.”

    [Did Peak Oil Arrive in 2014? By Ron Patterson Posted on Mon, 01 December 2014 22:25] (oilpricedotcom)

  13. Nony on Thu, 25th Feb 2016 1:50 pm 

    “Bottom line, there is no doubt that Russia is now in decline.”

    [Anticipating the Peak of World Oil Production by Ron Patterson Posted on 07/26/2014]

  14. twocats on Thu, 25th Feb 2016 2:09 pm 

    good compilation Nony. You are dedicated.

  15. Anonymous on Thu, 25th Feb 2016 2:32 pm 

    On a yearly average, and just from eyeballing, it looks like 2014 was the peak for Russia, If not then the 2014/2015 difference is insignificant. Why is calling the peak and getting it a couple of years wrong either way such a big deal anyway?

  16. JuanP on Thu, 25th Feb 2016 2:36 pm 

    Oil prices to stay low, https://www.rt.com/business/333619-novak-oil-price-agreement/

  17. Apneaman on Thu, 25th Feb 2016 2:40 pm 

    twocats, don’t encourage it.

  18. IfuckYouOver on Thu, 25th Feb 2016 2:43 pm 

    Another intellectual masturbation over number of barrels of oil.

    These analysis are useless because they assume all barrels of oil are the same.

    Without data about chemical composition of the different source of oil and data about energy content of these different source of oil, these kind of analyses e don’t give us good information about what is really happening.

  19. shortonoil on Thu, 25th Feb 2016 3:13 pm 

    “On a yearly average, and just from eyeballing, it looks like 2014 was the peak for Russia,”

    August ’14 to November ’15 is sixteen months, or sixteen data points. The last point, November ’15 falls more than 1.75 std. units from the mean using a t statistic. We can therefore declare that with a 95% probability that Russian Peaked last November. That may, however, only be a temporary peak in this data set.

    The best way to know for sure would be to build the CDF (Cumulative Distribution Function) of the data from as far back as the data is reliable (Russian data from the Soviet era was not reliable). At $30/ barrel it would most likely, however, be a waste of time. When a nation goes into terminal decline is now probably more a matter of when they run out of money than geology. Most of the world’s producers are now operating below their full life cycle production costs. The name of the game is now EBITDA – cash flow.

  20. roxy on Thu, 25th Feb 2016 3:56 pm 

    I have to agree with Ron. He makes a great case for world peak. Hard to argue when Russia, USA and Saudi Arabia are now declining.

  21. twocats on Thu, 25th Feb 2016 5:49 pm 

    ap-man,

    I know, I’m a sucker and debater, so I tend to be very forgiving.

    Ron did and does make a great case that we are essentially at the moment of Peak Oil, whether you want to say 2005 – 2020 bumpy plateau, or 2014, 2015, those are all arguments that can be made. Ditto on Russia comments.

    I think Nony is fine in pointing out that Ron’s high levels of certainty and his unusually dismissive tone of contrary opinions on his own blog undermine the rest of his analysis.

    I do see that Ron’s changed his tone slowly over the past year or two, and I think for the better. If that change has been purely subconscious on his part and he wants no recognition of it, fine. That Nony feels the need to go full-Benghazi on him, well, its not that big of deal. He’s pulling quotes directly from Ron (or at least, they sure look familiar, I haven’t verified them).

    Do I disagree with Nony 98.7% of the time, sure I do. Is he completely without merit? More importantly, do I feel he is incapable of reasoned analysis? Some of his recent technical points on shale oil have been quite good. And I feel overall he has been less antagonistic – but that might just be my imagination. According to the no-good-deed-rule, I’m sure he’ll piss me off soon enough. But it will be his fault if he does, not mine 🙂

  22. Apneaman on Thu, 25th Feb 2016 6:10 pm 

    twocats, too much attention and he will imprint on you and follow you around and shit hoping you’ll pet him again and feed him treats. Be sleeping on your porch.

  23. Nony on Thu, 25th Feb 2016 6:50 pm 

    purrrr. 😉

  24. peakyeast on Fri, 26th Feb 2016 5:46 am 

    The world is a supertanker – everybody knows they dont change course on a dime.

    Alle these small bumps up and down doesnt mean anything. Things must be evaluated on a longer timescale than a year. – I think that should be clear from looking at historical production.

    But of course sitting and nitpicking about tiny details of short duration may help ADHD and Asberger patients.

  25. shortonoil on Fri, 26th Feb 2016 7:46 am 

    So much for Russia has Peaked.

    http://www.zerohedge.com/news/2016-02-26/about-oil-freeze-russian-crude-production-sets-new-post-soviet-record-february

    Its coming, but its not here yet! It is now a money game, and has little to do with geology. The Russians have an advantage because of their weak ruble. The Saudi’s are stuck with dollars. They will have driven the Russians out -right after they have gone broke.

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