Saturday, February 14, 2009

World's Oil Production: Top Consumers and Producers, and The Effects on USO, USL, and UCO

With the recent collapse of the price of oil, OPEC countries have agreed to cut production. Which countries, if any, will actually cut production, and what would the effect be on the price of oil?

First, let's take a look at the top producing countries:

World's top oil producers (as of 2007, in barrels per day):

Saudi Arabia 11,000,000 bbl
Russia 9,870,000 bbl
United States of America 7,460,000 bbl
Iran 3,956,000 bbl
China 3,725,000 bbl
Canada 3,310,000 bbl
Mexico 3,083,000 bbl
Norway 2,560,000 bbl
Venezuela 2,398,000 bbl
Iraq 2,093,000 bbl
Brazil 1,797,000 bbl
Libya 1,712,000 bbl
United Kingdom 1,636,000 bbl
Indonesia 837,500 bbl
India 810,000 bbl
Argentina 730,000 bbl
Egypt 665,000 bbl
Australia 540,000 bbl
Syria 379,000 bbl
Denmark 342,000 bbl
Thailand 310,000 bbl

The question is, of these countries, which ones will actually cut production, and which will not given that they may desperate need to oil revenues. Let us first take a look at the top oil consumers (data from 2005):

United States of America 20,800,000 bbl
China 6,930,000 bbl
Japan 5,353,000 bbl
Russia 2,916,000 bbl
Germany 2,618,000 bbl
India 2,438,000 bbl
Canada 2,290,000 bbl
South Korea 2,130,000 bbl
Brazil 2,100,000 bbl
Mexico 2,078,000 bbl
Saudi Arabia 2,000,000 bbl
France 1,999,000 bbl
United Kingdom 1,820,000 bbl
Italy 1,732,000 bbl
Iran 1,630,000 bbl
Spain 1,600,000 bbl
Indonesia 1,100,000 bbl
Thailand 929,000 bbl
Australia 903,200 bbl
Taiwan 816,700 bbl
Turkey 660,800 bbl
Egypt 635,000 bbl
Venezuela 599,000 bbl
South Africa 519,000 bbl
Argentina 480,000 bbl

And here is the the net between production and consumption:

(please click on image to enlarge)

From the list, we can see that Saudi Arabia that is pretty much the only country with significant exports that has the luxury of allowing itself to cut production. Russia desperately needs the revenue, so does Venezuela and several of the other top net exporters.. The US, China, do not export. The US is dead last on this list.

In 2007 Saudi Arabia was responsible for around 17% of the world production of 60.1M barrels per day, for 30% of the net exports of 28.2M barrels per day.

So, when OPEC says they will cut production, will they? How much will the actual reduction be, and how will it affect the price of oil? Given that oil consumption is unlikely to pick up due to the current economic crisis, the answer to this question may can be used to reach conclusions on what will the price of USO, USL, UCO do in the near future. It does not look too good for 2009, regardless of stated production cuts.

You may download this file here in Excel format.

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