Wednesday, 2 July 2008

First quarter excess oil supply

According to the IEA, during the first quarter of this year, there was a daily world excess supply of oil amounting to about 400,000 barrels a day.

True, there were supply problems for most of last year. However, the extent of excess supply was never more than 1 percent a day (see chart below).

The price of oil today? I am too scared to look.

9 comments:

huntse said...

The front WTI future is currently at 142.14. The problem with the graphs is that by aggregating, the important detail has been lost. Yes there may well be excess supply in aggregate, but there is not excess supply in the places where demand is driving the oil price higher. Much of the oil transportation and refining infrastructure is geared towards getting oil to the West, not to the new markets which are experiencing the main growth right now. Also there may well be excess supply on average, but there is not necessarily excess supply (yet) of the actual grades that people want until the stuff is refined.

There's an interesting debate about oil prices generally here.

Nick Drew said...

accepting huntse's point about loss of detail, nevertheless your graph is a great way to illustrate a comment I made on your last oil posting, Alice, about how finely balanced the S/D picture is

and it is this that drives prices sky-high - higher than most people imagine would be the 'fundamental' result of such a position - in a way that has been seen in other commodity markets (e.g. the UK natural gas market in 2004-05, when we were on the cusp of moving from being a net exporter to a net importer)

it also illustrates why a relatively small down-tick in demand (prob China) could make such a difference - it would move the picture into clear excess supply: end of 'bubble'

aSteve said...

Fantastic find, Alice...

Can you divulge the source of yur figures?

powerman said...

I think this is more evidence that the price of oil is being heavily influenced by monetary issues (collapsing value of a dollar rather than increasing value of oil) and by simple flight of capital from other asset classes.

aSteve said...

I agree, powerman, and while I don't distrust Alice, I'd love to see the source for the data - to establish if I can see anything else in the data summarised here.

Alice Cook said...

asteve, I got the data after a webseach. I found the International Energy Agency website.

Brace yourself, more energy-related posts are on their way.

Alice

aSteve said...

:-) I was trying to be lazy... I'd hoped you'd give me the URL...

I think that the price of oil is the next big story... as the price of oil underpins the price of gas - and the price of that pair underpin the price of energy in general... and the price of energy in general underpins the price of agricultural produce and transport in the context of trade. If the price of oil is not underpinned by physical supply/spot demand - then the whole house of cards could easily come tumbling down - and give rise to the greatest stock market crash in living memory.

powerman said...

I see the big picture of the economy, since the 90s like so:-

When central bankers are spooked (i.e. Greenspan panicking about the Asian crises of the 90s), they tend to create lots of new credit. This credit then plays musical chairs through asset classes (dotcom stocks, the mainstream stock market, real estate, gold then finally basic commodities) until it can no longer find a home. At this point a lot of it just evaporates out of circulation as it is destroyed by falling asset prices. There is much wailing and gnashing of teeth. Then the cycle starts again.

Very, very occasionally, us proles get lucky in the cycle and manage to strong-arm decent wage rises via collective action that make our debts seem a bit smaller.

aSteve said...

Interesting FT article:

http://www.ft.com/cms/s/0/5a1f45ee-4907-11dd-9a5f-000077b07658.html

If the graph accurately reflect publications by the IEA, then it dramatically undermines statements made by the IEA to the Treasury Select Committee.