Due to South Korea’s heavy exposure to China, and overall growth of the Asian market, the Korean KOSPI Index—the Dow Jones for Korea—serves as a very nice leading indicator for the price of crude. As seen below, peaks and troughs in the KOSPI (red) tend to lead the overall price of crude (black) by anywhere from a couple months to a year. As of now, the KOSPI index is hitting new all-time highs with crude playing catch up. With recent events now taking place in Egypt and the safety of a vital chokepoint coming under concern, we may see the current divergence between the two charts narrow quite quickly.
Source: Bloomberg
Also, if we take a look at OPEC production we see an interesting topping pattern occurring over a ten to fifteen year period that may be further evidence of their inability to meet increasing global demand. What’s most interesting about this chart is that Saudi oil production peaked in 2004 even in the face of a huge run up in oil from /barrel to 5/barrel in 2008. Percentage wise, oil gained close to 400% over those 4 years whereas production increased only an approximate 20% in response. That’s just not good business…unless, that’s all you got to give.
Source: Bloomberg
Here’s a look at Mexico’s oil production also. Is this a similar topping pattern?
Source: Bloomberg
There’s absolutely no ambiguity in the case of the North Sea. It’s been in decline for more than a decade now.
Source: Bloomberg
