Falling oil output from aging fields, once insignificant compared with global production, has become large enough to impact world supply and may help explain the constant tightness in the oil market this year, according to analysts.

Oil production is now in decline in at least 18 major producing countries including the US, UK, and OPEC members Indonesia and Venezuela, and total production from this group is falling by 1 MMb/d every year, according to the latest data.

The oil futures market can spike on a temporary outage of just a few hundred thousand barrels a day, so what is in effect a permanent outage of 1 MMb/d may help explain some of the momentum behind the 53% rise in US crude futures so far this year to near $50 a barrel, analysts who study depletion said.

"Depletion has become a serious issue for the oil market, and I believe it is contributing to market tightness," said Chris Skrebowski, editor of the London-based Energy Institute's Petroleum Review. Skrebowski has studied the issue using data from BP's widely read Statistical Review of World Energy data.

"What it means is that before you meet a single barrel of demand growth you have to replace all the missing barrels," he said. "Depletion is really an extra demand. Countries where oil production is still expanding are being put under increasing pressure to make up growing depletion rates. It's a huge drag on the system."

And, as oil fields are ageing and their output declining even within countries where outright production is expanding, overall decline rates are estimated at closer to 3.5 MMb/d.

Michael R. Smith, technical director of Energyfiles, an oil and gas information and forecasting service, estimates depletion from declining countries is running at even higher levels, at around 1.5 MMb/d.

Add in the declines at mature fields in expanding crude producers and an additional 5 MMb/d is required to keep up with an average demand rise of 1.5 MMb/d, he said.

"The 30 or so countries that can increase output will not only be required to satisfy demand growth of say 1.5 MMb/d, but will also need to provide an additional 1.5 MMb/d each year to make up for the declining countries," he said.

But as supply peaks and declines in more countries over the coming years, fewer nations will be left to make up the shortfall. Smith estimates production from declining countries makes up around 38% of global supply. However, few analysts factor such depletion into their forecasts.

08-30-04