Oil Production Vital Statistics June 2016

The big news in May’s production figures is Canada down 620,000 bpd in the wake of the Fort McMurray wild fire, Nigeria down 250,000 bpd in the wake of civil unrest on the Niger Delta and Libya down 80,000 bpd as that country disintegrates in the wake of western intervention in its civil war.

Global total liquids production was down 760,000 bpd in May and while the oil price was perky, getting above $50 in early June, it has not really responded to any of those events.

To make matters worse for producers, the drillers are showing signs of going back to work. The main decline in Canada is reversible and will likely spell oil price weakness in the months ahead as production is brought back on. Brexit spells uncertainty with the most immediate consequence being the strengthening of the US$ pushing commodities prices lower.

The following totals compare May 2016 with April 2016:

  • World Total Liquids down 760,000 bpd
  • USA down a significant 110,000 bpd
  • North America down 730,000 bpd (includes USA)
  • Canada down 620,000 bpd
  • OPEC down 120,000 bpd
  • Saudi Arabia up 40,000 bpd
  • Iran up 80,000 bpd
  • Nigeria down 250,000 bpd
  • Libya down 80,000 bpd
  • Russia + FSU up 80,000 bpd
  • Europe down 100,000 bpd (YOY)
  • Asia down 30,000.

And on the drilling front:

  • US oil rig count up 25 from the low of 27 May
  • International rigs up 5 since last month

These are signs that $50 is sufficient to encourage producers back to the drilling market that may produce a negative feedback loop for months / years to come.

This article first appeared on Energy Matters.

EIA oil price and Baker Hughes rig count charts are updated to the end of June 2016, the remaining oil production charts are updated to May 2016 using the IEA OMR data.

Figure 1 The near term peak in the oil price (WTI and Brent) was on the 8th of June at $51 and therefore pre-dates Brexit. The market reaction to Brexit was quite muted with the pound falling sharply while the FOOTSIE made significant gains. The oil price may have fallen marginally on the back of a strengthening $. At the moment it is impossible to predict from this chart where the oil price is heading next. As I write (5th July) Brent is trading at $49. It is difficult to find fundamental reasons for the oil price to head higher at this time.

Figure 2 At this scale, the oil price is in no man’s land. It never reached the lows of the last rout in 1998 but broke through the rising bottoms trend where it is currently resting. On the Bear side, Brexit has created huge uncertainty in the global political and financial system, loss of significant production in Canada had little, if any, positive impact on price and return of that production may weigh in and perky prices are sending drillers back to work. On the Bull side there is not yet much to mention.

Figure 3 Not updated since March.

Figure 4 The US oil and gas rig counts have both risen slightly. Oil is up 25 rigs to 341 from the low of 316 seen on 27th May.  Gas is up 7 rigs to 89 from the low of 82 seen on 3rd June. Herein lies the conundrum for the oil market. Rising price will send US drillers back to work creating a barrier to higher prices for the foreseeable future. Many observers would have anticipated that over $60 would be required to make LTO profitable. It would be interesting to know where the new rigs are heading. Perhaps Arthur Berman can answer that.

Figure 5 Stacking the lines from Figure 4 shows the tiny reversal in total US rig count. Good news for drilling crews and consumers but potentially bad news for the remainder of the global oil industry. I would not bet on this being the bottom in US drilling.

Figure 6 The near-term peak in US production was 13.24 Mbpd in April 2015.  The May 2016 figure was 12.53 Mbpd, down 710,000 bpd from that peak and down a significant 110,000 bpd  from last month that once again, in part, reflects data revisions to last month’s figure. The decline in US production is slow and may be reversed if drilling picks up significantly in the coming months.

Figure 7 OPEC production has been rock steady for 12 months (dashed line) and currently stands at 31.87 Mbpd, down 120,000 bpd on last month. Notable movers this month were Iran up 80,000 bpd to 3.64 Mbpd. This now exceeds the IEA’s prior estimates of their production capacity. Libya down 80,000 bpd to 270,000 bpd which sounds like more trouble brewing in that country. Nigeria down 250,000 bpd to 1.37 Mbpd on the back of insurgents sabotaging production on the Niger Delta.

Figure 8 The public version of the IEA full report upon which this chart is based has not been published. So the chart is not updated since April.

Figure 9 In May, Saudi production stood at 10.25 Mbpd, up 40,000 bpd from April. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait where production from the Wafra heavy oil field, is now effectively zero. Saudi Arabia is effectively pumping at capacity. The fabled 2 million bbls per day spare capacity is either a figment of imagination or heavy oil that has no refining market.

Figure 10 Iran produced 3.64 Mbpd in May, up 80,000 bpd on the previous month and is now pumping at a level higher than prior capacity estimates made by the IEA. Iran has now returned to the production levels seen before sanctions were imposed.

Figure 11 ME OPEC rigs were up 6 to 149 in May and drilling in the ME remains on a cyclical high. Iran and Iraq are not shown since activity in these countries is disrupted by war and sanctions.

Figure 12 The international oil rig count is up 5 to 704 (not evident from this chart, blame XL). Europe and Africa are steady, the Middle East and Asia are up. Asia up sharply by 12 rigs to 138. But Latin America continues to decline. Venezuela down 10 and Brazil down 4 are the main culprits.

Figure 13 Russia and other FSU produced 14.08 Mbpd in April, up 80,000 bpd. There is no sign of Russian production buckling under price pressure and if anything it continues to rise slowly.

Figure 14 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. We are now coming to the cycle low as summer maintenance gets way. Several years of $100 oil and record investment has arrested the decline of the North Sea.

To get an idea of trend it is necessary to compare production with the same month a year ago.   European production is down 100,000 bpd to 3.43 Mbpd compared with a year ago.

      • Norway May 2015 = 1.90 Mbpd; May 2016 = 1.96 Mbpd; up 60,000 bpd YOY
      • UK May 2015 = 1.08 Mbpd; May 2016 = 1.01 Mbpd; down 70,000 bpd YOY
      • Other May 2015 = 0.55 Mbpd; May 2016 = 0.46 Mbpd; down 90,000 bpd YOY

Figure 15 This group of S and E Asian producers has been trending sideways since 2010 but it has been trending down now for over a year.  The group produced 7.54 Mbpd in May, down 30,000 bpd. Note that Indonesia (an oil importer) has rejoined OPEC. The OPEC production numbers are reported ex NGL by the IEA and this has meant a 170,000 bpd drop in reported Indonesian production.

Figure 16 N America is where much of the action is this month. The Fort McMurray fire that broke out on 1 May has knocked 620,000 bpd off Canadian tar sands production. N American production topped in April 2015 at 20.12 Mbpd. Group production now stands at 18.54 Mbpd down 730,000 bpd on last month and down 1.58 Mbpd bpd from the April 2015 peak.

Figure 17 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. May production was 95.36 Mbpd down 760,000 bpd on the month before and down 1.72 Mbpd from the July 2015 peak. Production falls in Canada (620,000 bpd), Nigeria (250,000 bpd) and Libya (80,000 bpd) have done most of the damage. And yet production remains above the long-term trend line and the oil price barely flinched and has been heading down since early June. The weight of over-supply is taking a very long time to dissipate.

Notification of pending paywall

It’s still pending 😉

Previous Editions of Vital Statistics

January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
January 2016
February 2016
March 2016
April 2016
May 2016

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14 Responses to Oil Production Vital Statistics June 2016

  1. Roger Andrews says:

    Euan: Figure 15 shows a significant decrease in China’s production over the last year or so. Do we know what caused it?

    • Roger

      China’s oil production is mainly from large and mature facilities. I guess with the low price of oil, there is a struggle to keep funding the work on maintaining oil production levels and so high cost fields shut down. The OPEC monthly oil market report for May shows declining expenditure on China’s oil plays.

    • Euan Mearns says:

      Roger, I can’t give a precise answer. I went to look at the rig count to be reminded that Baker Hughes report offshore rigs in China but not onshore. I was expecting to see a decline in drilling. 29 offshore rigs drilling in May 16 compares with 18 rigs Jan 14.

      China is a mix of onshore and offshore and I don’t know the split. They produce 4 Mbpd and if we assume a mean 7% decline rate then they need to bring on 280,000 bpd per year to maintain production.

      You can see from the chart that there are cyclical peaks and troughs. In China, these don’t closely match the annual cycle. But if you look at the stack of these 5 countries that the cycles do match an annual maintenance regime. Like the North Sea summer maintenance causes troughs.

      But the short answer I don’t know. Need someone from Rystad Energy to answer.

      • Thanks Euan. That’s more than good enough to be going along with.

        But if China’s production continues to decrease at a 7% annual rate it will be halved in ten years, representing a loss of about 2 million bbl/day in global supply. Not peanuts.

        • Euan Mearns says:

          It won’t decrease at 7% per annum. That’s what may happen if they do nothing. And they of course will do all they can to mitigate the declines. But here I am getting confused with underlying decline and actual decline. The underlying decline is likely much higher than 7%.

  2. OpenSourceElectricity says:

    And two news from outside the oil market, but maybe with mid – term influence on the oil market:

    – prices for solar panels have dropped by about 10% during the last month on world market, resulting in average prices now below 50$ct/Wp (lowest prices slightly above 40$ct/Wp)

    – Offsore wind has reached new low in tendering: http://www.businessgreen.com/bg/news/2463995/dong-energy-set-to-smash-offshore-wind-cost-reduction-record

    If this price reductions remain viable for the producers of renewable energy, the glass roof for the oil price has come down some more $ per barrel.

    Beside this, BMW now offers the i3 moddel with 50% more storage capacity for the same price.

    • Stuart says:

      But demand for oil and gas continues to rise.

      In 2009 the world consumed 84 million barrels per day, this year we will consume 95 million barrels per day.

      Renewables are not replacing fossil fuels they are merely providing an additional energy source. If you look back over human history, no energy source has ever been replaced.

      Gas did not replace oil, oil did not replace coal, coal did not replace wood. Today we burn more gas, more oil, more coal and more wood than any year in human history.

      New energy sources are merely added to the mix, the truth is we have never replaced an energy source. New sources of energy just increase aggregate economic demand. Demand for energy is not capped.

      • Euan Mearns says:

        Exactly. A point I have made many times. Energy transitions are additive not substitution.

      • OpenSourceElectricity says:

        Demand is not capped, but prices are capped.
        How much Wood would be burned at 200€ /MWh, and how much of it would be burned with no alternative available?
        This is why I write Oil and Gas get a glass roof in price from renewable generation, a somewhat flexible but not penetratable glass roof. Getting into it’s reach will move demand from Oil and gas to renewables.
        Which will limit Oil and Gas extraction to the amount which can be extracted below this glass roof – whatever this will be whith the geology given, and the technology to extract it then. (without influence of carbon pricing etc. )
        Falling costs on the side of renewables lower this glass roof, how much exactly is difficult to calculate, because it includes costs to move from one source of enegy to another – e.g. in case of vehicles.

      • Nick G says:

        Energy transitions are additive not substitution.

        That’s partly true (how much wood do we use to power transportation, these days? How much kerosene for lighting in the the US?). But, it’s not a law of physics, It’s just a social choice. We can phase out the burning of fossil fuels, just as we phased out lead in paint and gasoline.

        If we choose.

  3. Pingback: Oil Production Vital Statistics June 2016 | Energy News

  4. James W Buckee says:

    The world seems to be forgetting declines. They never sleep. The deferral of big projects and the reduced rig count will create shortages, no doubt. I am astonished that production has stayed so high for so long. I buy the continuation of projects already started but still….
    I think I have said before, for unconventional production, the production per rig may increase, as a result of pad drilling, severely reducing rig moves. But production per well is not necessarily doing well or rather much the same as before..

    • Euan Mearns says:

      Jim, I am doing a post on Peak Oil that will hopefully be ready to fly Wednesday. Comparing production 2008 with 2015 we see that 27 countries posted gains and 27 countries posted declines. So one conclusion is that despite $100 oil for 7 years, 27 countries still posted net declines. The net gain 08-15 was +8.85 Mbpd. And of that 7.10 Mbpd came from the USA and Canada.

      The flow on new projects sanctioned years ago may keep things going above expectations for a couple of years, keeping prices depressed. But every project delay or cancellation since 2014 is storing up a big hole in production in the years ahead. It would really take an outfit like Rystad Energy to work out the details here.

      Smart companies may want to sanction projects today, aiming for first production in three years time to catch the next big surge in price.

Comments are closed.