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Page added on April 15, 2009
Non-Opec decline: the means towards a renewed bull market
As the FT reported earlier this week, North Sea production is being hit critically by the economic crisis. The story quotes findings from a Deloitte report which says the number of exploration wells being drilled in the North Sea has collapsed by 78 per cent in the first quarter of 2009 versus the same period last year.
This is vitally important. As the FT highlights:
The worsening exploration climate could knock 10-15 years off the North Sea
In short, declining production from mature fields is not being compensated for because exploration and development of new smaller wells is not cost effective in the current price environment. All of which is accelerating non-Opec decline rates, which according to Goldman Sachs are needed before any renewed and sustained rally resumes in the crude market.
Significantly, the IEA in its latest oil market report published last week, also revised its oil supply forecast from non-Opec countries saying it expected production to fall by 320,000 barrels a day in 2009. The previous month it had left non-Opec output unchanged year-on-year.
Alongside the very serious (and much bigger than many expected) Opec cuts already enforced – all of the above could be pointing to a renewed supply/demand equilibrium in the market, facilitating the beginnings of the ultimate bull-market rally
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