Oil Depletion Running Ahead of Estimates

The FT Reports: "Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de­mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries’ demand will require investments of $360bn each year until 2030.

The agency says even with investment, the annual rate of output decline is 6.4 per cent."

If true, this means investors in USO (USO), DIG (DIG) or OIL (OIL) may see this as a low price point that ought not be  seen again.  the oil majors, like Exxon (XOM) or BP (BP), who have seen their share prices plummet with the price of oil will view the report as a long term bullish trend in the price of the commodity. Now, one can quibble on the rate of decrease, but the truth remains that demand is growing faster than supply is. Long term, that dynamic never leads to price decreases...