• 3 days Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 5 days Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 6 hours Rethinking election outcomes for oil.
  • 12 hours Clean Energy Is Canceling Gas Plants
  • 4 hours The Leslie Stahl/60 Minutes Interview with President Trump
  • 1 hour China leaders meet to discuss proposed 5 year economic plan.
  • 4 hours The City of Sturgis Update on the Motorcycle Rally held there, and the MSM's reporting hence
  • 2 hours Australia’s Commodities Heartland Set for Major Hydrogen Plant
  • 6 hours Saudi Oil Minister Abdulaziz said getting rid of oil "Far Fetched and Unrealistic". . True. . . but
  • 6 hours America's Frontline Doctors - Safely Start Living Again!
  • 1 day Video Evidence that the CCP controls Joe Biden
  • 4 hours Irina Slav has a good article - Regarding Investors & Oil
  • 2 days OP article : "Trump blasts Biden Fracking Plan . . . "
  • 2 days GAME CHANGER: MIT Startup Commonwealth Fusion says Commercial Product by early 2030s ! THIS CHANGES EVERYTHING..
  • 7 hours Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
  • 2 days Biden denies fracking ban
  • 3 days Is the coal industry on the way out?
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

China’s Oil Industry Is Faltering, Production Falls 5%

Low oil prices and spending cuts are cutting into China’s oil production, a little known source of output declines that are helping to balance the market.

New data shows that China’s oil production fell 5.6 percent in April compared to the same month a year earlier, falling to just 4.04 million barrels per day. Between January and April, production also fell by 2.7 percent.

The declines came because China’s large state-owned oil companies are struggling with low oil prices, and just like its international competitors, they have had to make painful spending cuts. Lower levels of spending are starting to translate into a drop off in production as the necessary maintenance to keep field output elevated is reduced. Much of China’s oil production comes from large oilfields that are mature and facing declining output. More investment helps to slow decline, but significant capex cuts are allowing production to slip. Investment in China’s oil sector fell from $54.4 billion in 2014 to just $39.4 billion last year, and likely will fall to $33.5 billion in 2016.

More evidence that China’s oil industry is faltering comes from import data – Clipper Data says that Chinese crude oil imports may have hit a record high in April. Related: Does Tesla Care About Its Stock Price?

OPEC, in its latest Oil Market Report, slashed its forecast for China’s oil production this year, lowering it by 90,000 barrels per day to an average of 4.23 mb/d for 2016. The downward revision came because China’s state-owned oil companies have gotten off to a poor start in the first quarter of this year – output was down 100,000 barrels per day in the first quarter compared to the same period in 2015.

PetroChina, a subsidiary of CNPC and the country’s largest producer, already saw its production fall by 0.2 percent in April. Overall, the IEA sees production falling by 4.1 percent this year as “it shuts down aging and high-cost fields.” That would translate into at least 200,000 barrels per day of lost output, potentially more. If output does indeed decline for the year, it will mark the first time that such a thing has occurred for the company since 1999.

 

(Click to enlarge)

The declines in production come as global oil supplies have tightened suddenly over the past few weeks. "The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," Goldman Sachs said this week. "The market likely shifted into deficit in May... driven by both sustained strong demand as well as sharply declining production.”

The global glut of roughly 1.5 mb/d has been erased since April. Canadian wildfires are the main culprit, knocking more than 1 mb/d offline. Outages in Nigeria have also disrupted roughly 400,000 to 500,000 barrels per day. China’s production declines are also contributing to a shrinking supply surplus.

But while China may be helping on the supply side of things, oil demand is not holding up as well as it has in years past. In March, for example, China’s oil demand grew only by 2 percent. That compares unfavorably to prior years, when oil consumption expanded at annual rates of 5, 6 or 7 percent.

Also there have been some macroeconomic warnings coming out of Beijing. China actually has posted slight declines in the consumption of fuel oil and diesel oil in recent months, according to OPEC’s latest report. That is because China’s industrial activity is showing some weakness, in part related to the country’s shift towards a more service-based economy, as well as pollution control measures. Just this past weekend, Beijing reported fresh data that disappointed consensus estimates, revealing industrial and retail activity are humming along at slower pace than many market analysts had expected.

 

This data backs up the IEA’s recent conclusion that India matters much more for the oil markets today than China. With oil demand set to grow by 400,000 barrels per day in 2016, “India is
taking over from the China as the main growth market for oil,” the IEA wrote in mid-May.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • GREG FOREMAN on May 16 2016 said:
    An objective analysis of the global oil market is impossible because of the fact OPEC, China, almost all of the foreigner oil producers are a lying bunch of hypocritic bastards. Their "supposed" production is impossible to audit or verify so the rest of world simply has to "accept" whatever crap they put out as the "truth". Once we, we as in the objective writers for publication such as Oil Price, come to this realization and not until we come to such realization, will we call their collective "bluff". The foreign producers are playing and consider the rest of the world producers fools. We need to quit playing into their hands.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News