A Decline in Net Oil Exports From the Top 15 Oil Producing Nations

Yesterday the front page of the WSJ had a very interesting article on oil exports, the article discusses how the total output from the top 15 oil producing countries has been decreasing for a variety of reasons.

(From the WSJ) “The world’s top oil producers are proving unable to put more barrels on thirsty world markets despite sky-high prices, a shift that defies traditional market logic and looks set to continue.

Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world’s top oil exporters fell 2.5% last year, despite a 57% increase in prices, a trend that appears to be holding true this year as well.

There are several reasons behind the net-export decline. Soaring profits from high-price crude have fueled a boom in oil demand in Saudi Arabia and across the Middle East, leaving less oil for export. At the same time, aging fields and sluggish investments have caused exports to drop significantly in Mexico, Norway and, most recently, Russia. The Organization of Petroleum Exporting Countries also cut production early last year and didn’t move to boost supplies again until last fall.

In all, according to the Energy Department figures, net exports by the world’s top 15 suppliers, which account for 45% of all production, fell by nearly a million barrels to 38.7 million barrels a day last year. The drop would have been steeper if not for heightened output in less-developed countries such as Angola and Libya, whose economies have yet to become big energy consumers.

For all the attention paid to China’s increasing energy thirst, rising energy demand in the Middle East may pose the greater challenge. Last year, the region’s six largest petroleum exporters — Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar — curbed their output by 544,000 barrels a day. At the same time, their domestic demand increased by 318,000 barrels a day, leading to a loss in net exports of 862,000 barrels a day, according to the U.S. Energy Information Administration.”

The graphic below depicts the change in energy production at each of the top 15 oil exports over the course of 2006 – 2007.

Graphic Courtesy of the WSJ

Let’s see the top oil producing nations are exporting fewer barrels of oil and the world is demanding more of it, sounds like a recipe for higher energy prices to me. Granted the overall energy price is complicated and contains elements of fear, speculation and the impact of the weak dollar, in addition to supply and demand. However I believe that these factors are only speeding up the arrival of the inevitable, with supply and demand remaining the key drivers.

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