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Asia’s Oil Production Expected to Increase
The Wall St. Journal carried the following report that points out the short term burst in oil supplies expected to come from Asia.
OCTOBER 7, 2008
Asia’s Oil Production Expected to Increase, Ease Stress on Global Supplies
By PATRICK BARTA
After years of putting a strain on world energy supplies, Asia is expected to significantly increase its own oil production next year, a development that could add to downward pressure on prices.
China, India and other big energy users in Asia aren’t about to become major oil exporters — far from it. They still consume much more crude than they produce and that trend won’t change.
![[Asia Expected to Boost Oil Production]](http://s.wsj.net/public/resources/images/AI-AR348_ASIAOI_NS_20081006150017.gif)
But several countries, including China, are lifting oil output. The unexpected boost — some industry analysts had said the region would struggle to maintain production levels in the current decade — should help Asia meet more of its own demand and reduce stress on supplies for the rest of the world.
The International Energy Agency in Paris expects China, Vietnam, Malaysia and other Asian-Pacific nations to increase production by almost 300,000 barrels of oil a day in 2009, the region’s biggest annual increase since at least the 1990s. When contributions from Central Asian nations such as Kazakhstan are added, the total increased production rises to about 500,000 barrels per day, analysts say. Overall, non-OPEC world production is only expected to grow about 760,000 barrels a day in 2009, the IEA says.
Asia’s production outlook stands in sharp contrast to other parts of the world, including Europe, which faces steep declines in oil output in 2009 and beyond. Asia is also looking better than Latin America and Russia, two regions analysts once thought would provide much of the world’s non-OPEC oil. In Russia, production is expected to remain flat or even fall next year, while declines in Mexico continue to drag down production in Latin America.
“You definitely have better supply fundamentals in Asia next year,” says Francisco Blanch, head of global commodities research at Merrill Lynch. Moreover, he says, Asia’s new oil is coming online at a time when demand in the region itself is slowing due to weaker economic growth. As a result, the added supply “could help soften up prices,” he says.
Last week, Merrill lowered its estimate for average 2009 oil prices to $90 a barrel from an earlier forecast of $107. The company predicted global demand will rise just 400,000 barrels a day next year, after rising 635,000 barrels a day this year.
Asia’s increased crude production is still a drop in the bucket compared to total world consumption, which is now approaching 87 million barrels a day. Moreover, many analysts believe Asian output will start falling in a few years, as big existing fields decline. Although growing at a slower pace in recent months, consumption continues to rise across the region, which means that any easing of supply pressures could be short-lived.
In the long run, “the reality is that Asia is short of oil, and that’s not really going to change,” says Jeff Brown, a Singapore-based economist at consulting firm FACTS Global Energy Group.
Write to Patrick Barta at patrick.barta [Email address: patrick.barta #AT# wsj.com - replace #AT# with @ ]
Tags: peak oil energy investments
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16 responses so far ↓
1 paultaut // Oct 7, 2008 at 1:59 pm
I don’t understand the entire gist of the article.
“non OPEC production is expected to rise 760k in 2009″ = Bearish BUT “both Russia and Mexico combined are expected to decline while overall consumption is expected to rise by 400k” = Bullish.
Conclusion “any easing of supply pressures could be short lived”,
I mean, whats the point?
2 Tony // Oct 7, 2008 at 9:21 pm
The reporters in the WSJ have to write about *something else* to fill the pages since the current banking/mortgage/credit crisis is all there is to report on (of any significance).
Since oil has fallen to $90, its not in the news as much.
I work in M & A (liability assessments for energy clients). Our activity has slowed considerably since the investment banks started cratering. Even the investment funds buying up old production assets have stopped calling this summer. Guess they are waiting for prices to fall further.
3 KV // Oct 8, 2008 at 6:08 am
Between Nov and Dec, many corporations will let go 10% to 20% of the staff Worldwide. We are moving to deflation, not inflation.
The reality is that we are broke but drunk on debt.
Look at the carnage in the stock prices of oil companies, there is two reasons for it:
First, investment banks are in tatter - world over.
Second, oil demand is being destructed.
What would I like? An accelerated investment in alternative energy toward the goal to avoid fossil fuel crisis ever. Will it happen? Not under McCain; a remote posssiblity under Obama.
We need to downsize in energy consumption, especially for transportation, and believe it or not, we will live better, way much better.
4 KV // Oct 8, 2008 at 7:35 am
Cost of owning and operating an average car is about $7,500; of this, $2,200 is the cost of gas (at 25 mpg for 15,000 miles at ~$4 per gallon), rest is cost of ownership, insurance, and tires, brakes, and oil changes. All these numbers are for after tax dollar.
Any reduction in this expense is going to go for better living.
People are already driving less, are downsizing on SUVs, and next will be affordable hybrids and electric. I expect electrics to be at about $15,000 (2008 dollars) at 100 mpg equivalent after 2017.
5 Robert Essian // Oct 8, 2008 at 7:58 am
Obama has that something extra. I expect to sacrifice and my gut tells me he’ll lead just fine.
He admits that more money will need to be spent right away but I see no choice.
Energy issue is his top priority w/tax credit for American car company’s only.
Everyone says that housing is the top priority but I don’t know how you can separate it from oil.
KV, you above everyone has motivated me to dig in. Thank you
6 Tony // Oct 8, 2008 at 8:25 am
KV:
Yes, a lot of drivers are seeing the benefits of smaller, more efficient cars. While electric/hybrid will be a big factor in the future, take note that several foreign manufacturers are bringing in to the US in 2009 - 2010 50 state clean (meet Tier II, BIN 5 emission standards) DIESELS. This list includes Honda, Suburu, VW, Mercedes, BMW, and others.
Hey, my 2002 VW Golf turbo diesel averaged 45 mpg over the last 90,000 miles.
Note that several US refinery upgrades are slanted towards distillates (fuel oil, diesel) to meet increasing demand for those products.
7 KV // Oct 8, 2008 at 12:37 pm
RE - Thank you, I think it began with you when you wrote - May Peace be to Your God.
Tony - Yes, diesel is an option, but we have to strive to get to 100 mpg equivalent or better in any fuel we may use. My favorite - for an old engineer by training - is Volt, and not at 40 miles on charge, but charge/fuel hybrid that can take you 300 miles for a couple of gallons or so.
I am not happy that demand destruction in oil is coming at unemployment and near failure of our financial system. I would have much more preferred it to be the case of competition from alternate technology in transportation.
8 paultaut // Oct 8, 2008 at 2:13 pm
Go Zenn, go Altair. Less than $30k including Battery. Upgrading kits available. Unfortunately, No Current Automaker wants to go the upgrade route, its not worth their while. They aren’t even researching it.
Is the Auto Industry going to be nationalized too?
Lets talk with your pocket books. Who is willing to buy the Common stock of either Ford or GM? Tommorow? The day after? How about when GM is below $5. Will Volt exist if GM doesn’t?
Innovations rarely come from the Behemoths. Nimble is unknown and an unknowable in their corporate structures. A Volt could probably be produced without the addition of all of the electronics and gizmos used to inflate the cost. Bare Bones, Air/heat, FM/AM radio, steering wheel and brakes. Automatic is extra.
This could be done and be affordable to the consumer. Will it be done? No.
9 KV // Oct 9, 2008 at 5:09 am
Paul - You are too negative. FYI. There was no significant infrastructure when Pearl Harbor happened. The US industry turned around the German onslought of men and machines.
I will invest in GM in 2009 as I had previously stated; Volt will go on, whether GM survives as it is now.
I can also cite many examples where so called innovative companies did not make it.
GM, F are too fat, they will come down in size by half, and in Ford’s case, family control of the company must go. Right now, they are still run by marketeers with MBA; what we need is entrepeuners with MBA to create new age of efficient, safe, samll and practical (in comfort zone) transportation. GM, F, Toyota, Honda, Nissan, Hyundai, Tata and many others have their work cutout.
10 paultaut // Oct 9, 2008 at 7:31 am
I AM too negative, Agreed. But that is exactly what is needed in this environment.
As far as I can tell, we are in a Bear market. When 8,000 approaches, I will try to find the best of the Beaten. Innovations die never to be heard of again in Bear Markets.
Ever hear of something called Broadband over Power Lines, High Speed Internet over Copper or over air Power transmission? If funding is not available, newer technologies that are funded replace those old innovations. The originators are long gone, their technology to be revisited, maybe.
This economy does not need an expensive new toy. The consumers need a Tata type EV.
11 paultaut // Oct 9, 2008 at 7:35 am
I often type too quickly: Entrepeuners, we need some of them too…:)
12 KV // Oct 9, 2008 at 9:49 am
RE - I add the following to your previous note.
Regarding housing: all these subprime and alt-A loans have lost money on the books and mark-to-market rule is killing the banks’ books, especially when there is no market for the assets they hold. Mark-to-market requires the banks to take the last trade and reduce the assets held by the bank, but, the liabilities stay the same, and for those non-paying loans, the liabilities become current, severely stressing banks ability to loan anything, hence the credit freeze, and the financial crisis.
Anything you do, screws up the stuff more! I don’t want the crooked bankers to get away with murder, like savings & loan, (Keating 5 were part of that, and so was McCain), but, for avoiding riots in the street, we will let them again.
Oil still flows, and prices are going down, most people don’t care beyond filling the car at the station, so it will not be in limelight for a while, and if oil demand continues to go down, we will revisit all the peak oil stuff after five or ten years.
In my mind, we seriously have population explosion and higher expectation for the living standards. Without increased in energy supply, increased conservation and increased efficiency, we got problems. In today’s climate, if we hold oil at $70, it is a plus.
13 KV // Oct 9, 2008 at 9:56 am
Paul - On your bear market observation: Duh!
What needs to be done is mobilization, and believe it or not, controlled, sustained, INFLATION.
Everybody will be in the same tax bracket, and all fixed debt will be worthless, but who cares? We will have lots of new debt, and we will be talking in 1000 Trillions instead of 1000 Billions.
But, we all will be working and making millions in salary and we all will be millionaires liviing ten million dollar shack.
Here is negativism for you!
14 robert essian // Oct 9, 2008 at 12:56 pm
To all…Scary stuff.
Now is the time to leed.
Help where you can and as Jim said “be careful out there”…Peace
15 paultaut // Oct 9, 2008 at 10:50 pm
This is 1930’s style Deflation, with the Financials over the cliff pulling everyone else over.
1400 on the Dow? 90% off the high. Thats what happened in the 30’s.
Gold meanwhile rose about 1,000%, I think, do not know for sure.
One thing though, look at all the stocks you missed buying on their way up. Start nibbling. 5 years down the road…you will be very very rich. The Credit Crunch will end and fundamentals will reasert themselves. If we all don’t have coronaries first.
16 KV // Oct 10, 2008 at 6:12 am
Paul - History never repeats the same way. Nobody has jumped out of the window (may be Cheney did, but we don’t know, it is a secret!).
In 1930s, dollar was pegged to Gold, today it is not, except by the market price of gold in dollars.
You can not eat gold, and intody’s world, if you have gold coins in your pocket, you will be shot dead for them!
If I had a choice, I would give markets rest for a whole month! Everybody goes home! Nothing happens!
I bet it will work.
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