Non-Opec oil supply, depending who you ask, has either already peaked or is on the verge of doing so. But Merrill Lynch Banc of America’s Francisco Blanch and colleagues point out that last year saw some surprising growth from the non-Opec world:
That’s not enough to turn around the general story of non-Opec decline, however. As Blanch et al write:
Still, our more positive near-term forecasts contrast sharply with a negative longer-term outlook. In fact, all we did is front-load some production growth which we had originally pencilled in for later years. Hence, while we remain optimistic in the near term, our analysis of volume additions through new projects and field extensions suggest non-OPEC supply will peak in 2011 and subsequently face consistent declines starting in 2012[...]
We think this earlier chart, showing ML-BAS’s new and previous forecasts, alongside the IEA’s, illustrates well how they see growth as simply being pushed forward:
Furthermore, Blanch and colleagues argue that the much of the effect of cuts in capital investment by both integrated oil companies and smaller E&P outfits have yet to be seen – primarily because supply costs also fell by a similar level last year:
Lower capital spending, therefore, did not impact volumes ready to come on stream, as new projects ramped up with surprisingly few delays or complications. Instead, the impact of lower upstream spending has been felt on new projects or expansions in the form of deferrals or cancellations.
In other words, the effect of deferred new projects won’t have shown up last year, but they will show up soon.
Non-Opec outlook not so bad, but demand also rises (FT Energy Source)
IEA warns non-Opec supply will peak in 2010 (FT Energy Source)