OPEC’s Oil Production Rose in December -OPEC January Report

According to the January report prepared by the Organization of the Petroleum Exporting Countries regarding the oil market for December, the OPEC oil production slightly rose during December compared with November’s 2011 oil production levels. This gain was mostly to the rise in Libya’s oil production.

OPEC’s crude oil production reached 30,822 thousand bbl/d in December compared with 30,651 thousand bbl/d in November. Libya’s oil production sharply rose again by 209 thousand bbl/d to 773 thousand bbl/d after it was nearly zero during most of 2011. The current production levels are still below of the average of 1.6 million bbl/d Libya had reached back in 2010.

The rest of OPEC countries nearly didn’t change their oil quotas during December. Therefore the 170.5 thousand bbl/d gain in the total OPEC countries’ production was solely due to the rise in Libya’s oil production.

The revised oil supply of non-OPEC countries is estimated at 52.41 million bbl/d in 2011, an increase of 0.13 million bbl/d compared with 2010’s oil supply. This revised estimate is lower than last month’s report.  This estimate could change as the level of uncertainty remains high vis-à-vis the oil production level of certain non-OPEC countries.

The global oil supply slightly rose during December by roughly 0.45 million bbl/d. Most of the increase was due to the rise in non-OPEC countries supply.

In 2012 the total global oil supply is expected to rise by 0.7 million bbl/d mainly due to the expected growth in non-OPEC countries’ oil production.

The expected worldwide crude oil demand growth was slightly revised up in the recent report. The global oil demand is estimated to grow in 2011 by 0.90 mbbl/d to an average of 87.84 million bbl/d.

OECD countries’ total oil demand is estimated to decline by 0.62% or 0.29 mbbl/d in 2011 to 45.87 mbbl/d, compared with 46.15 mbbl/d in 2010. This projection nearly didn’t change from last month’s report.

In 2012, the current expectations according to the OPEC report are that the demand for oil by OECD countries will decline by 0.14% to 45.80 mbbl/d; on the other hand, the non-OECD countries’ oil demand will rise in 2012 by 1.13 mbbl/d to 43.1 mbbl/d. The total global crude oil demand is expected to rise by 1.06 mbbl/d in 2012 compared with 2011’s oil demand. This growth rate is slightly higher than the growth rate of 2011 which was 0.9 mbbl/d.

Even if we take these figures at face value, it means that the total expected crude oil demand will rise by 1.1 mbbl/d during 2012, while the crude oil supply will rise by only 0.7 million bbl/d resulting in a shortage of nearly 0.4 million bbl/d during 2012. If Libya will increase its production during 2012 by 400 thousand bbl/d and other OPEC countries won’t cut their oil production, this could mean the crude oil market won’t tighten. Otherwise this outlook means that many countries will need to tape into their crude oil reserves or switch to alternative energy sources including natural gas which is only getting cheaper.

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