Should industry be alarmed by falling oil prices? IEA’s plan to draw down 60 million barrels of emergency oil stocks (including 30 million barrels from the U.S. SPR) pushed Nymex crude futures to their lowest level of the year. The IEA action is a response to recent OPEC disarray over whether or not to make up the Libyan shortfall.

 

The Land Rig Newsletter team, in the latest issue of the Biweekly Report, contends that ultimately the impact on U.S. liquids drilling will prove to be inconsequential in the greater scheme of things. First, Saudi Arabia has already signaled its intent to unilaterally and indefinitely offset the loss of Libyan supply despite OPEC’s lack of cohesion on the issue. In terms of overall market concerns, the move simply forestalls any Saudi urgency to ramp up supply. Second, the main driver in U.S. liquids drilling is not high oil prices but surging demand for NGLs. Thanks to growing supplies of low-cost ethane feedstock spawned by the liquids drilling boom, the U.S. is enjoying a spike in exports of petrochemicals.

The International Energy Agency (IEA) recently revised upward its estimates of global oil demand for 2010 and 2011 by an average 300,000 b/d to 86.9 million b/d and 88.2 million b/d, respectively, on new data showing stronger-than expected 3Q10 data, notably in the OECD, and updated GDP and price assumptions. The IEA also reported that global oil supply fell by 150,000 b/d to 86.9 million b/d in September on lower non-OPEC output.