Global production of crude oil reached a new, all time high in November of 81.81 mbpd. That’s not good news. Especially at a time when the rate of demand growth for oil has downshifted from its historical 2% rate to something closer to 1%. More chilling still is that the price crash, which started in mid 2014 and took prices from a seemingly stable $100 level down to today, did not produce a supply response. No, instead, global oil production is up 4 mbpd (using the monthly data) since the start of 2014. That’s just grim for producers everywhere. Or rather, producers outside of low-cost OPEC.
Equally astonishing: according to the latest data, global crude oil production in 2016 will likely average right around 80.4 mbpd, a statistical match to 2015’s 80.5 mbpd. So even in 2016, the global oil complex was still making no response whatsoever to lower prices. Why haven’t lower prices driven supply lower?
The explanation is fairly straightforward: the rate of global oil demand growth is now slow enough that it can be adequately covered by the rate of newly developed oil brought to market. This equilibrium relieves both the futures market, and the oil extraction industry, of pressure.
In the latest issue of the TerraJoule newsletter, I discuss briefly The Hunt for Peak Oil Demand. Get the latest free, bi-monthly by signing up here: TerraJoule.us newsletter.