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India Will Lead Global Oil Demand By 2035

India Will Lead Global Oil Demand By 2035

Offshore rig

Oil market participants and analysts have been closely watching the record level of supply coming out of the United States that is threatening to undo OPEC’s production cuts. But in the latter part of 2017 and early in 2018, robust oil demand growth — both in emerging markets and OECD economies — has supported oil prices as much as the cartel’s production restraint and the weakening U.S. dollar.

Traditionally, all eyes have been fixated on China and the pace of its oil demand and imports growth, but lately India has grabbed global attention after its oil imports rose to record highs amid strong economic growth and fuel demand. Projections of India’s long-term energy and oil consumption are also optimistic, and India is already a major oil demand growth driver.

In China, January crude oil imports jumped to a new record of 9.57 million bpd, but forecasts of slower GDP growth are making analysts wary of overly optimistic projections. China’s crude oil demand growth could slow down this year to 4.2 percent from 5.5 percent last year, according to S&P Platts analysts.

In India, high refinery runs and expanding refining capacity amid a strong recovery in demand pushed crude oil imports to a record 4.93 million bpd in January 2018, up by double digits compared to both December 2017 and January 2017, according to data compiled by Thomson Reuters Oil Research & Forecasts.

Although the January imports figure may have a seasonal explanation, with spring refinery maintenance approaching, longer-term projections and Indian refinery expansion plans support the view that oil demand growth will be strong. India plans to boost its crude oil refining capacity by 77 percent by 2030 to meet its growing fuel demand.

…click on the above link to read the rest of the article…

By 2020 it may be clear to everyone that oil decline has begun

By 2020 it may be clear to everyone that oil decline has begun

Preface. There are two parts to Dittmar’s study. The first one concerns production, based on the most recent years of oil production.  Dittmar found a strong pattern of oil decline after the plateau of 3% a year for five years, followed by a decline of 6% a year thereafter.

The assumption that OPEC nations (i.e. Saudi Arabia, Iraq, Iran, Kuwait, UAE, and Qatar) can continue producing oil at the current rate is based on potentially exaggerated reserve figures, which went up substantially in 1985 and haven’t budged a barrel down since then.  But for OPEC, and all other regions and nations, Dittmar predicts the maximum possible production based on his model, and says that perhaps the Middle Eastern OPEC nations can continue to produce as much oil as they are now until 2050.

In my opinion, he overestimates the amount of North American tight shale oil and tar sands oil that can be produced given their low EROI’s and high energy/monetary cost, but since all his figures are the best possible, he assigns 4.5 million barrels per day (mbd) production for USA tight oil through 2030 and 3 mbd for Canadian tight oil plus oil sands.

Of course, no matter how accurate the model is, Dittmar points out that it won’t matter if a civil war, terrorism or natural disasters in any oil-producing or refining region occur, which would quickly reduce exports. Plus competition for the remaining oil might increase conflicts the current world’s major powers with catastrophic consequences. The model only applies to a stable world for the next 30 years.

Here are the nations already declining at 6%: the EU and Norway, Azerbaijan (2017), Asian nations Indonesia, Malaysia, Australia, Thailand, Vietnam (2016), Algeria (2015), and Mexico (2014). All other oil-producing nations will join the 6% club by 2031 except OPEC.  Many are already in their 3% decline state, which starts 5 years earlier.

…click on the above link to read the rest of the article…

Saudi/Russia-Led Oil Supergroup In The Making

Saudi/Russia-Led Oil Supergroup In The Making

OPEC oil production

OPEC and the non-OPEC producers’ part of the production cuts deal will have a plan for long-term cooperation drafted by the end of 2018, as they seek to institutionalize their current collaboration into a supergroup of oil producers led by Saudi Arabia and Russia, the UAE’s Energy Minister Suhail Al Mazrouei told The National in an interview published on Thursday.

The producers aim “together with the secretary general [of OPEC, Mohammad Barkindo], to put together a draft agreement for this group [of 24] to stay together for a longer time”, Al Mazrouei said.

Putting together a draft charter and discussing it during the year is one of the UAE’s aspirations, said the minister whose country is currently holding OPEC’s presidency.

“If we achieve the market balance, I think we can see significant amount of investments coming to the E&P business and we can see that many of the 24 countries who have signed the Declaration of Cooperation can benefit from it,” Al Mazrouei told The National.

The idea to follow up on the current OPEC/non-OPEC cooperation came originally from OPEC’s Secretary General Mohammad Barkindo, who said as early as in October last year that the partnership could be institutionalized.

Last month, Khalid al-Falih, the energy minister of OPEC’s de facto leader and largest producer Saudi Arabia, said that “There is a readiness to continue cooperation beyond 2018…The mechanism hasn’t been determined yet, but there is a consensus to continue.”

Al-Falih, as well as Russia’s Energy Minister Alexander Novak, has hinted several times that the cooperation could continue in some form—although not necessarily in oil market management—even after the end of 2018, when the current pact to curtail oil production expires.

In an interview with S&P Global Platts published earlier this week, Novak said that Russia wanted to build a long-term relationship with Saudi Arabia and the broad OPEC alliance once their agreement expires.

Saudi Arabia, Russia Ink 3 Huge Energy Deals

Saudi Arabia, Russia Ink 3 Huge Energy Deals

Saudi Arabia

Saudi Arabia hits bullseye, IPO and LNG deals cements geopolitical cooperation Russia

Hidden by the fog of the ongoing oil market volatility and the Turkish adventures in Syria, OPEC leader Saudi Arabia has been cementing its geopolitical position for years. In Riyadh meetings this week between Saudi and Russian officials, major energy deals were sealed, changing the regional constellation dramatically. At the same time, the geopolitical shift of the century now starts to bear fruit.

Russia has directly offered to invest in the upcoming Aramco IPO, supporting the efforts of Saudi Crown Prince Mohammed bin Salman (MBS) to diversify the economy of the kingdom. During the meetings, not only new Saudi investment deals in Russia were sealed, but also the commitment of several Russian investment parties in the Aramco IPO.

After weeks of receiving a hell of a beating in the press (analysts started to doubt that it would ever happen), not only positive news has come from the NYSE and LSE, but also — as expected — from Russian institutions.

Kirill Dmitriev, CEO of the main Russian sovereign wealth fund, Russian Direct Investment Fund (RDIF), stated in Riyadh that he expects that a Russian and Chinese joint investment fund, working in conjunction with several major Russian banks, will be part of the Aramco IPO. He also indicated that other Russian financial institutions and investors are very interested to take a part of the 5 percent of Aramco being offered in the IPO.

These statements are a significant boost for MBS and his IPO advisors, as the participation of a Russia-China investment fund also shows the interest of Chinese parties in the stakes. While Chinese parties are expected to be willing to hand over tens of billions, Dmitriev’s statements have widened the scope.

…click on the above link to read the rest of the article…

OPEC January Oil Production Data

OPEC January Oil Production Data

The OPEC Monthly Oil Market Report is out production data for January 2018. All data, unless otherwise noted, is through January 2018 and is in thousand barrels per day.

OPEC crude only production has held steady for three months. However, this chart masks the fact that November production was revised downward by 45,000 barrels per day and December production was revised downward by 107,000 barrels per day. January production was 76,000 barrels per day below last years 12 month average of 32,378,000 barrels per day and 247,000 barrels per day lower than OPEC’s 2016 12 month average of 32,549,000 barrels per day.

OPEC oil production was down just 8,100 barrels per day in January. November production was revised down 45,000 bpd and December production was revised down by 107,000 bpd. The largest revisions were for Venezuela. Their production was revised down 28,000 bpd in November and 98,000 bpd in December.

Algeria, like at least 8 other OPEC countries, is in continuous decline.

Angola peaked in 2008 at a 12 month average of 1,870,000 barrels per day are currently about a quarter of a million barrels per day below that number.

Ecuador’s crude oil production increased steadily for four and one-half years, from mid-2010 to January of 2015 and has been on a bumpy decline for the last three year

Equatorial Guinea’s chart speaks for itself. I really don’t know why they joined OPEC. Their production is clearly in decline but is not enough to make much difference either way.

…click on the above link to read the rest of the article…

Is History Repeating Itself In Oil Markets?

Is History Repeating Itself In Oil Markets?

Oil Industry

Back in 2014, U.S. shale production was growing so fast that it ended up crashing the market. Now, history could be repeating itself.

That was the warning from the International Energy Agency, which said in its latest Oil Market Report that a “second wave” of shale supply threatens another downturn.

Total global oil supply is expected to grow faster than demand this year, which could lead to another downturn. It’s a conclusion that the IEA tried to emphasize in previous reports, but the message finally seems to be sinking in.

The extraordinary run up in benchmark prices in December and January came to a startling end two weeks ago. Part of the reason was because of the broader market turmoil in equities, and part of it was because hedge funds and other money managers had overbought oil futures, exposing the market to a price correction.

But as the IEA notes, the real worry is rising oil supply, which means that “the underlying oil market fundamentals in the early part of 2018 look less supportive for prices.”

It isn’t all bad news for benchmark prices. The IEA noted that due to the OPEC production cuts and strong demand, inventories fell at a remarkable rate last year. The oil inventory surplus currently stands at about 52 million barrels above the five-year average, down sharply from 264 million barrels a year ago. Importantly, while crude oil inventories are closing in on the five-year average, total stocks of gasoline and other refined products have already fallen well below that threshold. “With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand,” the IEA wrote.

(Click to enlarge)

But even as the elusive “balance” in the oil market is within reach, the IEA says things might quickly reverse.

…click on the above link to read the rest of the article…

IEA Warns Of New Oil Glut

IEA Warns Of New Oil Glut

oil pipeline

The global oil market could slip into deeper oversupply on the back of non-OPEC production growth led by the United States, the International Energy Agency said in its latest Oil Market Report.

“The main factor,” the IEA said, “is US oil production. In just three months to November, crude output increased by a colossal 846 kb/d, and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”

Commenting on the recent reversal in oil prices, the authority attributed it to profit-taking and a market correction spanning all industries, adding that oil’s fundamentals supported a decline in prices.

The situation in the United States suggests that history is repeating itself and what we are seeing now is indeed a second shale revolution that could bring petroleum liquids production on par with global demand growth.

But that’s not all. The IEA noted the recent shipment of the first U.S. condensate cargo to the UAE, which although unique might prove to be the start of a new era in international oil trading patterns.

The news is certainly not good for OPEC and, to a lesser extent, Russia, but there is some light at the end of the tunnel: global economic growth could turn out to be stronger than previously expected and this would help offset the impact of growing U.S. production on prices and keep them where they are now.

The authority hinted that the end of the OPEC deal could be in sight given that the overhang in OECD oil inventories has shrunk to just 52 million barrels from 264 million barrels a year ago, but added that the trend in oil prices could convince the cartel to wait.

Separately, the IEA maintained its 2017 oil demand growth estimate at 1.6 million bpd and said this year demand will grow by 1.4 million bpd, a 100,000-bpd upward revision on the January OMR estimate thanks to IMF’s expectations of stronger economic growth this year.

Venezuela Is Moving From Crisis To Collapse

Venezuela Is Moving From Crisis To Collapse

Venezuela

Venezuela’s slumping oil production is a “clear and present danger” to the oil market, RBC Capital Markets said this week.

Venezuela’s production continues to fall at a frightening clip, falling to about 1.6-1.7 million barrels per day (mb/d) in December. On an annual basis, Barclays predicts that Venezuela’s output will fall sharply from 2.18 mb/d in 2017 to just 1.43 mb/d this year, a decline of roughly 700,000 bpd.

The steep declines will increasingly be felt worldwide given that oil demand is growing briskly and the OPEC/non-OPEC coalition continues to keep 1.8 mb/d of supply off of the market. Global inventories have declined so steeply that unexpected geopolitical surprises carry more influence than they used to.

“We continue to contend that, given 2018’s tightening oil market, any potential geopolitically driven supply disruption would have an outsized impact versus recent years when the market was awash in crude,” Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote in a research note. “The clear and present danger to watch is Venezuela, which arguably has progressed past the risk stage given that production is in freefall.

RBC Capital Markets echoed Barclays, predicting output declines on the order of 700,000 to 800,000 bpd.

While that scenario is really bad, the uncertainty for the country’s output is probably skewed to the downside. The economic, political and humanitarian crisis is only getting worse. The government is in a debt vice, and it is hard to see how it will meet payments this year. The IMF predicts that inflation is running at a 13,000 percent annual rate. GDP is expected to shrink by 15 percent this year.

…click on the above link to read the rest of the article…

Oil Production Vital Statistics January 2018

Oil Production Vital Statistics January 2018

The oil price has begun 2018 strongly with Brent breaking through $70 / bbl for the first time since December 2014. OPEC+Russia+others’ discipline on production constraint remains high with ~ 1.7 Mbd production withheld from the market. The IEA reports an ~1 Mbpd stock draw in the OECD + China in 4Q 2017. IEA revisions transform the picture in the USA from one of static production to one of strong growth over the last 3 months (this undoes one of the assumptions used in my 2018 oil price forecast).

The inset image (live chart below the fold) shows a slow motion train wreck in Venezuela where production has fallen 810,000 bpd since December 2014.

The dramatic slide in oil production in Venezuela began ~ December 2014. We have to presume that the collapse in the oil price has something to do with this. There is however no sign that rising price, now offset by falling production, is averting that country’s collapse. The oil price was held back in 2017 by rising production in Nigeria and Libya. Production in Libya is now holding steady at ~ 1 Mbpd  and production in Nigeria is holding steady at ~ 1.65 Mbpd. According to the IEA, OPEC compliance with the agreed cuts is now running at 129% in part due to the unscheduled collapse in Venezuelan supply.

I have been following bio-fuel production, pointing out that it had been on a cyclical high last autumn and was scheduled to fall by ~ 1 Mbpd over the winter. This fall is duly underway (below). This, combined with the collapse of Venezuela and continued OPEC++ discipline has underpinned the strong oil price rally.

The following totals compare December 2016 with December 2017:

  • World Total Liquids 97.87/97.59 -280,000 bpd
  • OPEC 12: 32.87/31.89 -980,000 bpd
  • Russia + FSU 14.53/14.44 -90,000 bpd
  • Europe OECD 3.66/3.24 -420,000 bpd
  • Asia 7.57/7.20 -370,000
  • North America 19.48/21.04 +1,560,000 bpd

In summary, we see production constraint in OPEC+Russia, production decline in Asia and Europe offset by production growth in N America.

…click on the above link to read the rest of the article…

What Could Push Oil To $100?

What Could Push Oil To $100?

Oil rig offshore

If anyone thought the latest oil market outlooks of the EIA and the IEA are upbeat, here’s an even more upbeat one from Energy Aspects: The consultancy expects crude demand this year to grow by 1.7 million bpd, and says Brent could touch above $100 a barrel in 2019.

According to Energy Aspects, the reason for the further jump in prices will be a drop in new production outside the U.S. shale patch. It’s a little hard to buy that, however, if one remembers that there is 1.8 million bpd in production capacity ready to be tapped again once OEPC and Russia taper their production cuts. That alone should take care of the demand growth that the consultancy predicts for this year. That is, unless it booms by 2 million bpd, which is the top of the range forecast by Energy Aspects. But even then, the U.S. and Russia alone could take care of it: The Russian state majors are itching to expand production in eastern Siberia.

Of course, the likelihood of OPEC and Russia bringing all that production online is highly debatable, as the partners in the cut deal seem still determined to continue with the original plan. Nevertheless, the barrels are there, so there’s no urgent need for actual new production yet. However, if global demand grows so much so quickly, does anyone have any doubts that the new, expanded oil cartel will be flexible enough to make the best of the situation? Hardly.

So how likely is this demand growth? According to Energy Aspects, there is currently “no real drag on demand growth.” The global economy is in growth mode, which lends strong support to the price momentum, and the short-term forecasts for the top consumers of crude oil are all bullish. Yet, there’s one potential drag: prices.

…click on the above link to read the rest of the article…

WTI Tumbles To $62 Handle After IEA Predicts “Explosive” US Shale Production As Oil Prices Surge

Update: The IEA report has impact prices – as would be expected – sending WTI back below the crucial support level of $63 once again…

With WTI Futures net long positioning at extreme longs, one wonders if $63 can hold.

 

*  *  *

Overnight, the International Energy Agency became the latest entity to recognize that 2018 is shaping up to be a pivotal year for energy production in US shale fields, and a showdown between OPEC and non-OPEC producers, namely those in the US.

According to the latest IEA report, US shale output is poised for “explosive” growth in 2018 as WTI trades at its strongest level since the summer of 2015, which in turn will unleash pent up US output, potentially leading to a sharp oversupply of black gold,

As Bloomberg  notes, the IEA’s forecast supports OPEC’s own projections: As we pointed out yesterday, the cartel also expects US production to ramp up in 2018 as shale producers – much more lean and efficient and significantly delevered after the 2015/2016 “episode” – unleash output as oil price continue to rise well above the generally accepted shale breakevens in the low $50s.

The IEA boosted its forecasts for non-OPEC supply growth this year by 100,000 barrels to 1.7 million barrels a day compared with last month’s report, modestly higher than OPEC’s projections. It also warned 2018 could be a “volatile” year as Venezuela’s energy industry teeters on the brink of collapse.

Both OPEC and IEA expect Venezuela’s difficulties to continue after Latin America’s socialist paradise brooked the biggest unplanned production decline of 2017.

“The big 2018 supply story is unfolding fast in the Americas,” the IEA said in its monthly report. “Explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.”

…click on the above link to read the rest of the article…

OPEC December Oil Production

OPEC December Oil Production

The latest OPEC Monthly Oil Market Report is out with production numbers for December 2017. All data is in thousand barrels per day.

Total OPEC crude only production was up by 42,400 barrels per day in December. However, that was after November production was revised downward by 75,000 bpd. So OPEC production was actually down 33,000 bpd from what was reported last month.

I have posted OPEC production according to “secondary sources” as well as OPEC production based on “direct communication” in order to show what Venezuela said they were producing when called by the editors of the MOMR. More about that below Venezuela’s production chart.

Algeria was up 30,000 bpd in December but the downward trend continues.

Angola’s crude oil production is holding steady.

Ecuador’s latest peak was in 2015 and they have been in slow decline since then.

…click on the above link to read the rest of the article…

OPEC Oil Production Rose In December Despite Plunge In Venezuela Output

In its latest monthly report, OPEC announced that according to secondary sources, December oil production by the cartel rose by 42.4kbpd from November to 32.416mmbpd, if 144kbpd below October’s 32.56mmbpd level, and just below the mandated production ceiling of 32.5mmbpd.

While the biggest producer Saudi Arabia saw its output dip by 11kbpd to 9.918mmbpd, it was Venezuela’s production that tumbled by nearly 5%, or 82.2kbpd, to 1.745mmbpd, and is rapidly becoming the biggest swing factor in rising oil prices. The decline was offset by a jump in Nigerian oil production, which pumped 75.7kbpd more in December, to 1.861mmbpd. Algeria, Angola, Iran and Kuwait also saw their output increase in December.

OPEC also revised its 2017 global oil demand growth higher, now at 1.57mmbpd, averaging some 96.99mmbpd in 2017. For 2018, oil demand growth is anticipated at 1.53mmbpd, or some 98.51mmbpd.

Meanwhile, world oil supply in December increased by 0.40 mb/d m-o-m, to average 97.49 mb/d, representing an increase of 0.83 mb/d y-o-y. Preliminary non-OPEC oil supply, including OPEC NGLs, was up by 0.35 mb/d m-o-m in December to average 65.07 mb/d. For 2017, non-OPEC supply is estimated to grow by 0.77 mb/d y-o-y to average 57.79 mb/d, representing a downward revision of 0.04 mb/d from last month’s report, following a downward revision in OECD and DCs by 28 tb/d and 35 tb/d, respectively, while the oil supply forecast for the FSU was revised up by 32 tb/d.

For 2018, y-o-y growth of 1.15 mb/d is forecast, following an upward revision for production in the US, Canada, Mexico and the UK and downward revisions in Norway and Argentina, and showing total supply expected at 58.94 mb/d. In December 2017, OPEC crude oil production increased by 42 tb/d, according to secondary sources, to average 32.42 mb/d. Separately, non-OPEC oil supply growth – mostly shale – in 2017 was revised fractionally lower to 0.77mmbpd.

…click on the above link to read the rest of the article…

Is An Oil Price Spike Inevitable?

Is An Oil Price Spike Inevitable?

Oil Rig

The oil glut is over, at least when it comes to U.S. commercial inventories: over the past two months they have been within the average range for the season, thanks to hefty draws. These draws, one analyst argues, are a signal of higher-than-expected demand that is not only an American trend but a global one.

Judging by recent price movements, Flynn is hardly an exception: Brent touched $70 last week, a level only the most bullish of the bulls hoped to see at this time of the year as doubts about OPEC and Russia’s ability to offset growing American production persisted. Now, with new discoveries continuing to sit at record lows, there is a chance that $70 a barrel is only the beginning—as long as demand delivers on expectations, that is.

For now, global crude oil demand forecasts seem to be overwhelmingly positive. The EIA, in its latest Short-Term Energy Outlook, forecast global oil consumption growth of 1.7 million bpd this year and a bit less in 2019.

The International Energy Agency is a bit more guarded, forecasting in its latest Oil Market Report an average demand growth rate of 1.3 million bpd for this year. This would be a slowdown from last year’s 1.5 million barrels daily, but still a robust growth rate, in spite of the wider adoption of EVs and the increase in renewable power generation capacity.

If these forecasts turn out to be accurate—the oil market is notoriously difficult to predict—then we could see a real price spike before too long. In fact, we could see a deficit at some point in the future, according to Flynn, who estimates that the one-trillion-dollars in exploration investments that fell victim to the 2014 price collapse could cause a global production drop of between 8 and 11 million barrels per day.

…click on the above link to read the rest of the article…

Russia To Discuss Possible Exit From OPEC Deal

Russia To Discuss Possible Exit From OPEC Deal

Russia

Russia may be on its way out of the OPEC output reduction deal, according to the country’s Energy Minister, Alexander Novak.

Reuters reports that Novak might discuss the country’s potential exit from the pact in Oman next week. Russia had vowed to cut output by 300,000 barrels per day under the agreement as part of a group of non-OPEC producers who elected to coordinate the bloc’s market stabilization initiative.

“We see that the market is becoming balanced. We see that the market surplus is decreasing, but the market is not completely balanced yet and, of course, we need to continue monitoring the situation,” Novak said.  Russian oil majors have been complaining about the deal and how it is creating stumbling blocks on the road towards the industry’s expansion plans.

Brent barrel prices are currently approaching $70 a barrel, suggesting crude markets are rebalancing as we approach June, when the deal is set for “review” – a process with little description in the full text of the OPEC deal’s renewal, which was agreed upon in November.

As far as OPEC members are concerned, the deal could carry on beyond the end of 2018. Speaking to CNBC, the United Arab Emirates’ energy minister, Suhail al-Mazrouei said: “I am expecting that this group of countries that stood and have become responsible for helping the market to correct, (that) there is a very good chance that they could stick together and put a shape around that alliance.”

His statement comes amid a variety of scenarios on how the deal might come to an end, featuring civil unrest in Venezuela and Iran that may lead to supply disruptions; Russia pulling out of the pact in June; OPEC members and other parties to the deal starting—or continuing—to cheat; and oil prices rising too high.

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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