Jeffrey Brown, logi Energy, Comments on Five Stages in the Life Cycle of Net Oil Exporters

October 28, Morning

After hitting the (so far) all time record monthly high of $134 in June, 2008, the monthly low spot US crude price was $39 in February, 2009.  In eight months,the price of oil has doubled.

In the same 8 month period, Sam’s (Samuel Foucher, logi Energy) best case is that the (2005) top five net oil exporters shipped about 5% of their remaining post-2008 cumulative net oil exports–1/20th gone in 8 months.

October 28, Afternoon

One other point about oil prices around $78.  As noted, it is twice the  recent monthly low that we saw in February, but it is also higher than all average annual prices prior to 2008.

As I have previously noted, I think that net oil export supply and demand factors are the primary drivers affecting world oil prices. We have weak OECD demand, recently strong and rising non-OECD demand and a long term, and in our opinion, accelerating rate of decline in net oil exports.  So, one factor–OECD demand–is pulling demand down, while another factor–non-OECD demand–is pushing demand up, all against the backdrop of a long term accelerating rate of decline in net oil exports.
I wonder if oil traders keep being surprised because they are “looking for their keys under the streetlight,” i.e., focusing on the one negative factor for oil prices, while not focusing on the other two factors driving oil prices higher.
IMO, excess production capacity estimates are too high, and  I suspect that we are beginning to transition from voluntary + involuntary reductions in net oil exports this year to mostly involuntary reductions in net oil exports next year.
As noted , Sam’s best case is that the (2005) top five net oil exporters depleted close to 5% of their post-2008 cumulative net oil exports in just the eight months since February.

October 29:

Note below, the production decline rates for the six examples of declining net oil exporting countries were all in the single digit range, and all but one were less than 5%/year.

October 29

(1)  Increasing production, and generally increasing net oil exports, e.g., Angola currently

(2)  Production peak and a near term net export decline rate (less than 5%/year), e.g., Saudi Arabia currently (2.7%/year).

(3)  Intermediate net export decline rate (5% to 10%/year), e.g., Argentina currently (8.6%/year).

(4)  Terminal net export decline rate (more than 10%/year), e.g., Vietnam currently (46.0%/year).

(5)  Net importer status, e.g., Indonesia, UK & Egypt.
Normally, smaller producers don’t have a big impact–either as they show increasing production and then as they peak–but because of the  accelerating net export decline rate that we see post-peak, smaller exporters with declining production may be having a disproportionate impact on the supply of net oil exports, because of accelerating net export decline rates.

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