The Organization of the Petroleum Exporting Countries’ spare capacity, the oil market equivalent of insurance, has since the 1960s been available to avoid severe price spikes by smoothing out periodic supply disruptions caused by geopolitical events.
We have for more than a year argued the world was hurtling into an energy crisis of epic proportions that would result in a multi-year bull market for oil.
OPEC’s spare capacity, however, was the tricky one. Monthly data released by several different sources can vary wildly. Given the strategic importance of oil revenue to many Gulf States, hard data on productive capacity has at times been viewed as state secrets and either difficult to get or taken with some skepticism. How then can we be so confident that OPEC’s spare capacity is nearing exhaustion? Because they just told us so.
In his keynote speech, Barkindo warned that “OPEC is running out of capacity,” and that “with the exception of two or three members, all are maxed out.” Further, “the world needs to come to terms with this brutal fact” and that it is a “global challenge.”
Gee if only Canada could get its oil to international markets and take pressure off of supply lag.
He also tweeted that he was busy this morning buying the dip :)