January 28, 2016

VIVA LA BIG DIFFERENCE:

Welcome to the new oil order (Ed Morse, 1/28/16, Financial Times)

[T]he new energy world order is one in which the US, whose production was once half that of the other two producer giants, is now on a par with them. And that turns out to make a big difference.

In the old world oil order the US did not count -- with its declining output it was a taker of prices; with its permanent importer status, it was a bystander to global oil politics and production decision-making.

The shale revolution in the US has made a huge difference. The US is now arguably the world's largest oil liquids producer in the world, if you take into account crude oil production and other supply like liquefied petroleum gases (LPGs), biofuels output and the incremental volumetric gains from having the largest refining system in the world.

On paper the US might produce 9.3m barrels a day against Russia's 11.1m b/d and Saudi Arabia's 10.3m b/d. Add everything that looks and smells and is used as oil and the US is the biggest of the lot, producing 14.8m b/d versus the kingdom's 11.7m b/d, versus. Russia's 11.5m b/d.

We are used to old thinking -- a world of producers comprised of Opec plus critical non-Opec producers including especially Russia, Mexico, Norway, Oman and maybe a couple of others. The new order has rendered Opec irrelevant, an organisation crippled by disruptions and sanctions, with no will to work as one, able to be a negative force by bringing prices down, but incapable of finding a way to put a floor under prices.


Posted by at January 28, 2016 4:47 PM

  

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