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Sluggish Oil Demand To Keep A Lid On Oil Prices Amid Global Recession Fears

Sluggish Oil Demand To Keep A Lid On Oil Prices Amid Global Recession Fears 

John Kemp, senior market analyst of commodities at Reuters, cites a new report via B.P.’s finance chief that indicates global oil consumption will be less than 1 million barrels per day this year, an ominous sign that the global economy is quickly deteriorating.

Kemp said growth is expected to be less than one million barrels per day (bpd) would represent an increase of less than 1% in global oil consumption and the lowest level of growth since 2014 and before that 2012.

Back then, declining demand was due to elevated oil prices averaging above $100 per barrel in real terms. Now prices trend in the $50-$60 range for WTI, confirming that even with low oil prices, demand is nowhere to be seen.

B.P.’s global oil consumption is the most bearish among other predictions from the International Energy Agency (+1.1 million bpd), OPEC (+1.1 million) and the U.S. Energy Information Administration (+1.0 million).

Waning demand for oil across the world is the result of a global manufacturing recession festering underneath the surfaceThe global synchronized decline is structural and started in 4Q17, several months later, the trade war between the U.S. and China erupted in 1Q18.

Source: Bloomberg

Since global GDP drives oil consumption. Kemp shows that the World Bank (“Global economic prospects,” June 2019) data is indicating world growth will be in a slump this year. Estimates show global GDP has been revised lower from 3.0% in 2018 to just 2.6% in 2019.

Global GDP growth is at the same level as 2014 and before that 2012. So it makes sense why oil consumption has dropped to a five year low, it’s because the global economy has lost tremendous amounts of momentum, now reversing into a vicious downturn.

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

European oil consumption after North Sea Peak Oil

European oil consumption after North Sea Peak Oil

Hors-d’oeuvre

On the streets of Paris: 24 Nov 2018

Fuel-protests_24Nov2018Fuel price protests on the Champs Elysees

France-price-fuels_2008-2018https://france-inflation.com/prix-carburants.php

Reunion_truck_gilets-jaunes

20 Nov 2018: The “gilets jaunes” have a hard time to convince truck drivers to join their movement
https://www.francetvinfo.fr/economie/transports/prix-des-carburants/gilets-jaunes-les-routiers-divises_3045615.html

They were more successful on the French island of Réunion in the Indian Ocean, where blocked roads and petrol rationing resulted in empty supermarket shelves, highlighting how vulnerable our just-in-time society is.

Reunion_barrages_25Nov201825/11/2018 Road blocks in Réunion
https://www.linfo.re/la-reunion/societe/barrages-le-point-sur-le-reseau-routier

Reunion_fuel-shortage_Nov2018Petrol lines in St Denis, €20 rationing, shops closed, shelves emptying, medical supply disruptions
https://www.francetvinfo.fr/economie/automobile/essence/la-reunion-une-ile-asphyxiee_3048073.html

Oil statistics

European oil production peaked in 2000 at almost 7 mb/d, with a production plateau above 6.8 mb/d lasting for 7 years between 1996 and 2002. 17 years after the peak, production was around half of what it was at peak.

Europe_production_imports_1965-2017Fig 1: Europe oil consumption, net oil imports and production

BP’s definitions are as follows: “Oil production includes crude oil, shale oil, tar sands and NGLs (natural gas liquids – the liquid content of natural gas where this is recovered separately). It excludes liquid fuels from other sources such as biomass and derivatives of coal and natural gas.

Oil consumption is from inland demand plus international aviation and marine bunkers and refinery fuel and loss. Consumption of biogasoline (such as ethanol), biodiesel and derivatives of coal and natural gas are also included.

Notes: Differences between these world consumption figures and world production statistics are accounted for by stock changes, consumption of non-petroleum additives”

In Fig 1 and 3, net oil imports are calculated as the difference between production and consumption.

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

Has The World Started To Kick Its Oil Addiction?

Has The World Started To Kick Its Oil Addiction?

Offshore rig

Until a decade ago, most of the world was a captive customer of oil—consumers would pay any price for gasoline and oil demand was soaring regardless of the surging oil prices.

But recently, many countries around the world have started to show more sensitivity to oil prices—oil demand grows as their economies grow, but oil demand is also more susceptible to oil price swings, with the oil price-consumption correlation behaving more like an everyday product, according to data by Washington-based ClearView Energy Partners and research by Bloomberg Gadfly columnist Liam Denning.

Although it’s at least a decade or more too early to call the end of the world’s oil addiction, the research and data suggest that in a growing number of large oil-consuming economies oil demand now correlates negatively with oil prices. In other words, consumption drops when prices rise and vice versa—a common economic concept applicable to almost every other product on the market.

With oil, this has not always been the case.

ClearView Energy and Denning analyzed data for three 10-year periods ending in 2006, 2011, and 2016, respectively.

During the first 10-year period until 2006, countries comprising four-fifths of oil demand, including the United States, India, China, and Russia, showed a positive correlation between oil demand and their gross domestic product (GDP) and between demand and oil prices. In the decade before the financial crisis in 2007-2008, oil demand soared almost everywhere in the world, despite the fact that oil prices were also rallying. This was the period of Chinese industrialization and construction boom which gobbled up oil at any price. In most of the world, the picture was the same—oil demand rose together with rising economies and with rising oil prices, suggesting that those countries were captive customers of oil.

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

Peak Oil Demand Is A Slow-Motion Train Wreck

Peak Oil Demand Is A Slow-Motion Train Wreck

oil

Will oil demand peak within five years? 15 years? Or not until 2040 or 2050?

The precise date at which oil demand hits a high point and then enters into decline has been the subject of much debate, and a topic that has attracted a lot of interest just in the last few years. Consumption levels in some parts of the world have already begun to stagnate, and more and more automakers have begun to ratchet up their plans for electric vehicles.

But the exact date the world will hit peak demand kind of misses the whole point, argues a new report, which is notable since it is coauthored by BP’s chief economist Spencer Dale, along with Bassam Fattouh, the director of The Oxford Institute for Energy Studies.

They argue that the focus shouldn’t be on the date at which oil demand peaks, but rather the fact that the peak is coming at all. “The significance of peak oil is that it signals a shift from an age of perceived scarcity to an age of abundance,” they wrote. In other words, oil won’t be on the only game in town when it comes to fueling the global transportation system, which will have far-reaching consequences for oil producers and consumers alike.

The exact date is unknowable, and in any event, the year in which the world does hit peak consumption won’t result in some abrupt “discontinuity of behavior,” the report argues. Demand growth will slow and then decline, but probably won’t fall off a cliff. So, the exact date of peak oil demand is “not particularly interesting.”

Nevertheless, the implications of a looming peak in oil consumption are massive. Without an economic transformation, or at least serious diversification, oil-producing nations that depend on oil revenues for both economic growth and to finance public spending, face an uncertain future.

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

China’s oil peak 45 years after the US peak

China’s oil peak 45 years after the US peak

Empty_roads_Hangzhou_G20

Fig 1: Oil crisis in China like in 2005? No. By order: Free roads for G20 in Hangzhou

https://www.theguardian.com/world/2016/aug/31/china-hangzhou-propaganda-facelift-g20-summit

Strategically published only days before the G20 summit  the Wall Street Journal had an article on peak oil in China:

China’s Decline in Oil Production Echoes Globally

25/8/2016

chinapeakoil

Fig 2: A flat production peak in China
http://www.wsj.com/articles/chinas-decline-in-oil-production-echoes-globally-1472122393

It hasn’t echoed during the G20 summit.

If China is at peak oil now, then China is where the US was in 1970, 45 years ago. Let’s first have a look at what happened in the US. We limit ourselves to 30 years because 2000 was the last “normal year” before 9/11 and the Iraq war.

US_30_years_after_1970_peak

Fig 3: the first 30 years after the US oil peak

When US oil production peaked in 1970, US oil net imports were 3.4 mb/d. 30 years, 2 oil crises and 1 Desert Storm later  the US imported 12 mb/d, a total of 85 Gb during that period.

Of course it is nearly impossible to compare the US and China. The IEA has a table on Chinese oil demand in its World Energy Outlook WEO 2015:

US_China_oil_demand_to_2040_WEO_2015

Fig 4: Oil demand table in the IEA World Energy Outlook 2015

http://www.worldenergyoutlook.org/weo2015/

Note the opposing trends for the US and China:

Comparison_US_China_oil_consumption_200-2040_WEO2015

Let’s put the Chinese consumption into a graph, together with an assumed production profile, (similar to Fig 3):

China_oil_production_consumption_2010_to_2045

Fig 5: China’s oil imports for several scenarios

We assume that Chinese decline after peak production will follow the US pattern. On the consumption side the dashed line is the New Policies Scenario in the IEA WEO 2015, the thin straight line a 1.5% growth scenario starting with 2016. The IEA also assumes a CAAGR of 1.5% but applies it to a lower consumption level in 2014, explaining the difference in the later years.

For orientation and comparison, the dotted line shows the US consumption path shifted by 45 years to the Chinese consumption level in the production peak year 2015.

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

 

Peak Oil in Asia and oil import trends (part 2)

Peak Oil in Asia and oil import trends (part 2)

We pick up the question from part 1:

Asia_oil_production_consumption_2005-2015_fill_in-2035

Fig 11: Homework for governments

Let’s have a look where all the net imports into Asia have come from in the past:

Asia_net_imports_2001-2015

Fig 12: Asia net imports – overview

BP’s data on inter area oil movements start in 2001. Oil imports from the Middle East increased from 11.5 mb/d in 2001 to 15.5 mb/d in 2015 or 4 mb/d. This is an amazing “performance “ because Middle East exports to all countries  increased only by 0.8 mb/d (crude) and 0.7 mb/d (products) in 15 years!

World_crude_oil_exports_2001-2015

Fig 13: World’s crude oil exports

Global crude oil exports in 2015 were not higher than in 2007. Canadian exports (dirty tar sands mainly to the US) increased by 1.9 mb/d since 2001.

Middle East exports to Asia

Middle_East_oil_exports_2001-2015_Asia-share

Fig 14: Middle East oil exports share to Asia

Asia’s share of Middle East exports has increased from 60% in 2001 to 75% in 2015. Let’s have a look to which countries/regions these Middle East exports go:

Middle_East_oil_exports_by_destination_2001-2015

Fig 15 Middle East oil exports by destination

In the above graph we stack Asian countries on top of other countries which shows that Asia took away Middle East exports from the US and Europe which are in decline.

So how would that continue into the future? Let’s do a very simplified trend analysis without regard to oil prices, the type of oil, oil reserves and geo-political events and assuming no declining oil production in Asia.

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

We are at Peak Oil now; we need very low-cost energy to fix it

We are at Peak Oil now; we need very low-cost energy to fix it

I gave them this two-fold answer:

1. We are hitting something similar to “Peak Oil” right now. The symptoms are the opposite of the ones that most people expected. There is a glut of supply, and prices are far below the cost of production. Many commodities besides oil are affected; these include natural gas, coal, iron ore, many metals, and many types of food. Our concern should be that low prices will bring down production, quite possibly for many commodities simultaneously. Perhaps the problem should be called “Limits to Growth,” rather than “Peak Oil,” because it is a different type of problem than most people expected.

2. The only theoretical solution would be to create a huge supply of renewable energy that would work in today’s devices. It would need to be cheap to produce and be available in the immediate future. Electricity would need to be produced for no more than four cents per kWh, and liquid fuels would need to be produced for less than $20 per barrel of oil equivalent. The low cost would need to be the result of very sparing use of resources, rather than the result of government subsidies.

Of course, we have many other problems associated with a finite world, including rising population, water limits, and climate change. For this reason, even a huge supply of very cheap renewable energy would not be a permanent solution.

This is a link to the presentation: Energy Economics Outlook. I will not attempt to explain the slides in detail.

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

Egypt update: net oil importer and chokepoints

Egypt update: net oil importer and chokepoints

Oil production and consumption 

Fig 1: Oil production vs consumption

After a post-peak decline production has stabilized but consumption has increased relentlessly at a long-term 1.7% pa, slightly below population growth of around 2% pa. Egypt is now a net oil importer. On these trends, the gap between consumption and production is likely to get larger. This increases imports and the need for fuel subsidies. Let’s zoom into the monthly oil production (crude and NGL separately)

Fig 2: Production of crude oil and natural gas plant liquids

Crude oil production declined again since 2009 at 2.5% pa, offset by an increase in NGLs of 4.7% pa

Fig 3: Net crude exports and refinery utilisation

The crude oil exported up to 2005 (at low oil prices!) is now missing. EIA data are presently only available up to 2012. The EIA writes:

According to data from OPEC’s Annual Statistical Bulletin, Egypt’s refined petroleum output averaged 445,000 b/d in 2013, suggesting that refinery utilization was about 63%. Egypt’s refining output declined by 28% from 2009 to 2013. Facts Global Energy attributes this decline to Egypt’s policy that permits foreign oil producers to export more crude oil as repayment of EGPC’s financial debt. As a result, Egypt’s crude oil exports [56% EU, 28% India, 13% China] have not declined over the past few years, despite declining production. In turn, there is a lower volume of domestic crude oil available for the domestic refineries, and Egypt must make up for the difference by importing petroleum products and/or crude oil. Egypt imported about 145,000 b/d of petroleum products in 2014, according to Global Trade Information Services. Egypt also exported about 60,000 b/d of petroleum products that same year.

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

A Surprising Look at Oil Consumption

A Surprising Look at Oil Consumption

First, who’s oil consumption is increasing year after year, or who’s economy is booming? All charts below are consumption as total liquids in thousand barrels per day. Some charts are through 2014 while others are through 2013. Whatever the last year is on the yearly axis is the last year for that data.

Important: All charts are consumption, not production. 

C. Middle East

No doubt the Middle East is booming. The reason, most of them are oil producers and oil, for most of this chart anyway, the price of oil was increasing. They had lots of income, their consumption was increasing every year as was their economies.

C. Saudi Arabia

Saudi Arabia, by far the Middle East’s largest consumer, has increased consumption every year since 1995.

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

Petrodollar Reflux to Hit Treasuries, Other Assets

Petrodollar Reflux to Hit Treasuries, Other Assets

Executive Report with ISA Intel, Oil & Energy Insider:

The collapse in oil prices is draining oil-exporting countries of revenue. With substantially lower oil revenues, many of the world’s sovereign wealth funds are dropping in value, which has ramifications for the assets they are invested in. The IMF took a look at this connection between oil prices and sovereign wealth funds and raised the possibility that asset prices around the world could be negatively impacted.

Oil-Backed Sovereign Wealth Funds

Sovereign wealth funds emerged in a big way when oil prices started to rise in the early 2000s. An enormous transfer of wealth occurred from oil-consuming countries to oil-producing countries. Countries like the U.S., for instance, had to shell out ever more cash to buy imported oil from, say, Saudi Arabia.

The wealth accumulated in oil-producing countries. Since they needed to put all the surplus somewhere, they setup sovereign wealth funds to invest the money abroad. The IMF says that the total assets from all of the world’s sovereign wealth funds is estimated at $7.3 trillion.

The wealth transfer is clearly visible when looking at the current account balances of several countries. For example, the United States saw its relatively minor current account deficit balloon into a truly massive deficit by 2005, when oil imports peaked and prices rose. Of course, oil-exporting countries saw the mirror image of that experience, with surpluses opening up from 2004/2005 onwards.

The surpluses quickly disappeared following the financial crisis in 2008-2009 – when oil prices crashed below $40 per barrel – but came back relatively quickly following a rapid resurgence in crude prices.

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

Looking Back 10 Years After Peak Oil

Looking Back 10 Years After Peak Oil

All views expressed here are those of Verwimp Bruno and do not necessarily represent those of Ron Patterson.

1. INTRODUCTION

Introduction

Peak Oil is the moment in time when, on a global scale, the maximum rate of oil production is reached. The moment after which oil production, by nature, must decline forever. Since Earth is a closed system, next to this production (supply) event, there must be an equal demand event: Peak Oil Consumption. Since there are no substantial above ground deposits, Peak Oil Production and Peak Oil Consumption must coincide. The world consists of a lot of different countries, some of which are already far beyond peak oil production That leads to the assumption the world as a whole reaches peak oil production. On the demand side, it is worth looking, because different countries have different economies, different degrees of development, and so on, if, while some countries still experience significant growth in oil consumption, some countries are already well beyond Peak Oil Consumption by now.

2. PRODUCTION vs CONSUMPTION

The production history of crude oil is well documented. For all relevant OPEC and NON-OPEC countries the data are gathered by Peakoilbarrel.com here, OPEC Charts, and here, Non-OPEC Charts, respectively. It is clear some countries have reached peak oil production long time ago. For readers of this blog, familiar with these data, this is no surprise. Still world oil production is growing, because some countries make up for the countries that are losing production. Many readers of Peakoilbarrel.com wonder when the exact moment will be when global oil production will have reached that ultimate peak. But how relevant is that moment? Will it bring doom, gloom, the end of motoring, plastics and tooth paste. It might be more interesting to know whether your country is before, beyond or at Peak Oil Consumption right now. And what about coal and natural gas?

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

 

Saudi, US Oil Inventories Hit Record High as Demand Fizzles

Saudi, US Oil Inventories Hit Record High as Demand Fizzles

In the US, oil storage is seasonal. A big buildup starting late fall gets Americans and their favorite gas or diesel sipping or guzzling toys or clunkers through “driving season” – late spring and summer – when somehow everyone has to drive somewhere. After driving season, petroleum stocks fall. This pattern has played out this year as well, but with a difference.

Last week, the EIA reported that crude oil stocks rose 7.6 million barrels to 468.6 million barrels, the highest for this time of the year since records have been kept. Crude oil stocks are now 98 million barrels higher than they were last year at this time, when they were already bouncing into the upper end of the 5-year range.

This chart from the EIA shows the out-of-whack relationship between the five-year range (gray area) and the weekly buildup (blue line) this time around:

US-crude-oil-stocks_2015-10-15

Instead of getting better somehow, this situation simply got worse over driving season. At the peak of the buildup this year, crude oil stocks were 22.5% higher than a year earlier. Now they’re 26.4% higher than they were at this time last year.

If the inventory buildup this fall, winter, and spring continues in this manner from today’s much higher starting point, we can look forward to a fiasco on the storage front – and on the pricing front. Because at this rate, by April, we’ll be having oil coming out of our ears!

But this is a global issue for producers (or conversely, an opportunity for oil consumers). Here’s Saudi Arabia, which has been pumping oil at record levels to maintain its market share against Russia and the boys from the oil patch in the US and Canada: its inventories are ballooning too.

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

Oil and the Global Economy

Oil and the Global Economy

Oil Consumption and Economic GrowthHow important is oil to the future of the global economy?  The remarkable economic expansion of in the United States and other industrial nations over the past century or more has been fueled by a steadily growing supply of low-cost energy—mostly from fossil fuels—oil in particular which accounts for more global energy consumption than any other source.

But there is growing uncertainty whether this trend will continue as it has in the past.   How will shifting trends regarding the cost, demand, and supply for oil affect the global economy and the outlook for investment and economic growth?

Guests:

Key Questions:

  • Cost: What are the key trends regarding costs of oil production and what are the implications for the global economy and investment in the energy sector.
  • Price: How are recent trends regarding oil prices affecting the global economy? Is there a tension between sagging prices and rising costs and if so, what are the implications for the global economy and investment in the energy sector?
  • Demand: How are trends regarding oil demand —rising sharply in some countries, flattening in others—affecting the global economy?
  • Supply: How does uncertainty regarding energy supply factor into the outlook for the global economy and investment in the near-term and further down the road?

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

What Greece, Cyprus, and Puerto Rico Have in Common

What Greece, Cyprus, and Puerto Rico Have in Common

We all know one thing that Greece, Cyprus, and Puerto Rico have in common–severe financial problems. There is something else that they have in common–a high proportion of their energy use is from oil. Figure 1 shows the ratio of oil use to energy use for selected European countries in 2006.

Figure 1. Oil as a percentage of total energy consumption in 20006, based on June 2015 Energy Information data.

Greece and Cyprus are at the bottom of this chart. The other “PIIGS” countries (Ireland, Spain, Italy, and Portugal) are immediately above Greece. Puerto Rico is not European so is not on Figure 1, but it if were shown on this chart, it would between Greece and Cyprus–its oil as a percentage of its energy consumption was 98.4% in 2006. The year 2006 was chosen because it was before the big crash of 2008. The percentages are bit lower now, but the relationship is very similar now.

Why would high oil consumption as a percentage of total energy be a problem for countries? The issue, as I see it, is competitiveness (or lack thereof) in the world marketplace. Years ago, say back in the early 1900s, when countries built up their infrastructure, oil price was much lower than today–less than $20 a barrel (even in inflation-adjusted dollars). Between 1985 and 2000 there was another period when prices were below $40 barrel. Back then, the price of oil was not too different from the price of other types of energy, so an energy mix slanted toward oil was not a problem.

Figure 2. Historical World Energy Price in 2014$, from BP Statistical Review of World History 2015.

Oil prices are now in the $60 barrel range. This is still high by historical standards. Furthermore, much of the financial difficulty countries have gotten into has occurred in the recent past, when oil prices were in the $100 per barrel range.

While countries with a large share of oil in their energy mix tend to fare poorly, at least some countries with a preponderance of cheap energy fuels in their energy mix have tended to do very well. For example, China’s economy has grown rapidly in recent years. In 2006, its share of oil in its energy mix was only 23.0%, putting it below Norway but above Poland, if it were included in Figure 1.

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

Asia’s oil consumption at record high while production peaked in 2010

Asia’s oil consumption at record high while production peaked in 2010

The annual BP Statistical Review has come out, as usual in June. In this post we focus on the Asia Pacific region. This is important because the Australian government has offered the help of “Team Australia” to build the “Asian Century”. The question no one asks (or wants to ask) is how much oil there is to carry Asia through the decades to come. No one can give an answer of course but it is clear that if past oil consumption and production trends continue the region will slide into a huge oil crisis.

Overview

Oil production in the Asia Pacific peaked in 2010 (China offshore!) at 8.4 mb/d while consumption continued to increase to 30.9 mb/d.

Fig 1: Asia-Pacific oil production and consumption

The difference between consumption and production (net imports) is now 73% of consumption, up from 68% ten years ago.

Oil consumption changes

Let’s zoom into the last 10 years. Consumption growth dropped from 6.2% in 2009/10 to 1.5% in 2013/2014 but this is still an annual 440 kb/d. If this reduced consumption growth were to continue an extra 2.2 mb/d would be needed by 2020 and 4.4 mb/d by 2025.

Fig 2:  Asia’s oil production and consumption changes since 2005

Since global crude oil production started to peak in 2005 (base year in above graph), Asia did remarkably well to suck additional oil out of the global market, around 6 mb/d

 

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

Olduvai IV: Courage
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Olduvai II: Exodus
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