In October, global total liquids production hit a new record high of 97.84 Mbpd led by OPEC and Russia! This was caused largely by the scramble to boost production ahead of production cuts with a datum on October 2016. The US rig count continues to rise and US production has stopped falling. The rest of the oil production world outside of OPEC, N America and Russia continues to suffer under the weight of low oil price.
The oil price has pricked its $51 / bbl resistance. With OPEC ± Russia set to lower production and to maintain lower plateau levels combined with the relentless rise in demand the oil price should rally from here, but not by much. The ceiling is set by the cost of new supply that currently resides with the N American LTO frackers. US production has halted its decline which is perhaps a sign of what is coming.
The following totals compare October 2016 with October 2015:
- World Total Liquids +860,000 bpd
- OPEC +1,200,000
- Russia + FSU +510,000
- Europe -340,000 bpd
- Asia -350,000
- North America -580,000
The net figures from the above are +1.71 Mbpd and -1.27 Mbpd leaving a net +0.44 Mbpd increase that does not tally with the + 0.86 Mbpd global total liquids figure.
Year on Year, OPEC and Russia are the big winners. North America, Asia and Europe the big losers. And on the drilling front:
- US total rig count up 193 to 597 from the low of 27 May
- International rigs down 18 in October
This article first appeared on Energy Matters.
Figure 1 News of the OPEC feeble deal pushed oil prices slightly higher and they have now pricked the $51 resistance. While the trend this year is quite definitely up, there are still a number of bear factors in play, amongst them global total liquids hitting a new record high in October, and US production has stopped falling.
Figure 2 A significant break above the diagonal trend line should see a rally towards $65, sufficient to send the frackers back to work.
Figure 3 The rally in US drilling has been sustained with the total rig count rising for 20 consecutive weeks. Since the beginning of October, oil directed rigs are up 49 to 477 and gas directed rigs are up 25 to 119. The combined count is down 149 from one year ago.
Figure 4 Total US rigs are up 193 to 597 from the near term low of 404 seen on 27 May 2016.
Figure 5 The near-term peak in US production was 13.24 Mbpd in April 2015. October production of 12.35 Mbpd was actually higher than August and September and US production has stopped falling for the time being. Production is currently 890,000 bpd down from the April 2015 peak. It is possible that the uptick in US drilling activity has arrested the decline.
Figure 6 OPEC production, led by Saudi Arabia, continues to rise and sets new records each month spurred on by the prospect of the feeble deal that will see <1.2 Mbpd curtailed to restore production to where it was 1 year ago. Libya remains effectively off line. OPEC up 240,000 bpd since last month and up 1.2 Mbpd year on year.
Figure 7 OPEC spare production capacity ticked up in October to 2.32 Mbpd. If the production cuts are enacted then spare capacity should soar by over 1 Mbpd in January.
Figure 8 Saudi Arabia production was down 60,000 bpd in October but is up 341,000 bpd year on year. 10.06 Mbpd (dashed line) is the new quota level for January 2017 expressed in IEA currency.
Figure 9 Following the dramatic post-sanctions rise, Iran’s production has continued to push higher at a slower rate. Notably, Shell has just signed a deal to assist Iran on reservoir development. Iran produced 3.72 Mbpd in October, up 40,000 bpd since September and up 830,000 bpd year on year. The dashed line shows Iran’s new quota of 3.83 Mbpd in IEA currency. Hence, under the feeble deal, Iran will be allowed to increase production by 110,000 bpd.
Figure 10 ME OPEC rigs have flat lined at 160 for 3 months on a cyclical high. The all-time high is 161 and so it seems likely this is the number of rigs available to these 4 countries.
Figure 11 The international oil rig count hit a new low of 666 in October but rose to 681 in November. This chart needs to be contrasted with the OPEC chart above.
Figure 12 Russia + other FSU up 280,000 bpd since September to 14.45 Mbpd. Up 510,000 bpd year on year. Like OPEC, Russia + FSU have had the spigots wide open ahead of quota negotiations.
Figure 13 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. Group production is down 340,000 bpd year on year to 3.19 Mbpd. A year ago, the N Sea seemed to skip over maintenance that is now reflected in these numbers. The dashed lines go through the peaks and troughs of the whole stack.
Figure 14 Group production up 10,000 bpd to 7.36 Mbpd since last month. Down 350,000 bpd year on year. The plateau in this region’s production is well and truly bust, led by Chinese oil production decline.
Figure 15 Canada has all but recovered from the Fort McMurray wild fire. Group production is up 130,000 bpd since September to 19.34 Mbpd. Down 580,000 bpd year on year. The fall in US and N America production has stalled.
Figure 16 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. Production is up 750,000 bpd since September. Up 860,000 bpd year on year hitting a new record high.
Figure 17 Stock change = global total liquids production less demand. 2Q figures are impacted by -620,000 bpd in Canada in May, resulting from the Fort McMurray wild fire. But the market is heading back towards balance with forces driving different parts of the market in different directions.
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