In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.
Let’s take a look.
1. EV sales at record high
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- Sales of EVs and plug-in hybrid electric vehicles soared in the third quarter of this year, jumping 63 percent compared to the third quarter of 2015.
- Combined, about 45,000 EVs and plug-ins were sold in the U.S. in the third quarter. That is also up 20 percent from just the second quarter of 2016. Tesla (NYSE: TSLA) led the way, selling 24,500 vehicles.
- More than half a million EVs are currently used on American roadways.
- Sales are expected to continue to rise as costs fall. Battery costs have declined by 73 percent since 2008, falling to just $268 per kilowatt-hour, according to the FT. EVs are expected to hit price parity with conventional cars when battery costs drop to $100/kilowatt-hour, which many expect to happen in the early 2020s.
- Chevy is expected to release its all-electric Bolt by the end of the year and Tesla is set to release its Model 3 next year.
2. Saudi breakeven price higher than thought
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- The IMF sharply revised up its estimate for the oil price that Saudi Arabia needs for its budget to breakeven.
- In April, the IMF projected that Saudi…
In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.
Let’s take a look.
1. EV sales at record high

(Click to enlarge)
- Sales of EVs and plug-in hybrid electric vehicles soared in the third quarter of this year, jumping 63 percent compared to the third quarter of 2015.
- Combined, about 45,000 EVs and plug-ins were sold in the U.S. in the third quarter. That is also up 20 percent from just the second quarter of 2016. Tesla (NYSE: TSLA) led the way, selling 24,500 vehicles.
- More than half a million EVs are currently used on American roadways.
- Sales are expected to continue to rise as costs fall. Battery costs have declined by 73 percent since 2008, falling to just $268 per kilowatt-hour, according to the FT. EVs are expected to hit price parity with conventional cars when battery costs drop to $100/kilowatt-hour, which many expect to happen in the early 2020s.
- Chevy is expected to release its all-electric Bolt by the end of the year and Tesla is set to release its Model 3 next year.
2. Saudi breakeven price higher than thought

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- The IMF sharply revised up its estimate for the oil price that Saudi Arabia needs for its budget to breakeven.
- In April, the IMF projected that Saudi Arabia would need oil prices to average $66.70 per barrel in 2016 for its budget to breakeven, which would be almost a third lower than the $94.80 per barrel needed in 2015.
- But the IMF now says that Saudi Arabia’s 2016 budget has a $79.70 per barrel breakeven price. The reason for the upward revision is that Saudi Arabia’s efforts to cut spending, diversify its economy and find new sources of revenue have not been as successful as once thought.
- Moreover, oil prices are obviously not trading as high as $79 per barrel. Saudi Arabia has run up a large $87 billion fiscal deficit. “With oil expected to remain at the $50 to $60 level next year, you will need to see further fiscal consolidation” Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, told Bloomberg.
- Iran is doing much better, with a fiscal breakeven oil price at $55.30 per barrel. The difference between the two also helps explain the leverage that Iran had at the latest OPEC meeting in Algiers, and Saudi Arabia’s desperation to strike a deal.
3. Saudi Arabia’s record bond offering

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- To plug the $87 billion hole in its budget, Saudi Arabia turned to the bond market for help, where it sold $17.5 billion, the largest debt sale ever recorded by a developing country.
- The fiscal stress in Riyadh did not scare away investors. Saudi Arabia is still a very rich country and oil prices have stabilized and are expected to rebound. The five-year bonds had a yield of about 2.58 percent, lower than expected due to strong demand.
- Saudi Arabia wants to diversify its economy, hoping to raise $100 billion in non-oil revenue by 2020 through taxation and the growth of its private sector.
- State-owned Saudi Aramco will also see a small slice of the company partially privatized; an IPO slated for 2018 could yield another $100 to $150 billion.
4. Shale drillers drilling longer laterals

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- Shale drilling has become so successful over the past decade or so because companies have succeeded in pioneering horizontal drilling – drilling vertically and then turning the drillbit horizontally, extending the range of a well through a formation. That has allowed companies to open up more oil and gas reserves for extraction.
- The average length of laterals drilled into shale by E&Ps continues to grow. According to Bloomberg, the unofficial record for the length of a lateral drilled was 18,544 feet, or about 3.5 miles.
- More and more companies are extending laterals beyond 10,000 feet. Extending a lateral from 5,000 to 10,000 feet can make a well four and a half times more valuable, according to SM Energy (NYSE: SM), a company that just spent $1.6 billion for acreage in the Permian Basin.
- Pioneer Natural Resources (NYSE: PXD), another Permian driller, is doing something similar. “It only takes another two or three days to drill that extra 5,000 feet,” Pioneer’s CEO Scott Sheffield said. “We’re only spending 10 percent more and we’re getting a 25 percent net increase in productivity.”
5. Russian capex rises even though oil prices low

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- Russia has been hit hard by the decline in oil prices, but its state-owned companies continue to ratchet up spending during the downturn.
- That is because of a few quirks that incentivize more spending for Russian companies. Tax on Russian oil companies falls as oil prices fall, cushioning the blow for them. Of course, that hurts the Russian government even more – it takes in less revenue from low oil prices but also because the rate of its tax take declines.
- Second, the ruble tends to weaken as oil prices fall, which reduces costs (priced in local currency) for Russian oil companies. Brent prices fell by 47 percent in 2015, but measured in Russian rubles the price only fell 16 percent.
- These effects allow companies like Rosneft and Lukoil – which together account for about half of Russia’s oil production – to increase spending. Rosneft’s capex rose 30 percent in 2015 and Lukoil’s only fell by 11 percent.
- While other countries have seen output fall, Russia has succeeded in achieving a post-Soviet record high for oil production at over 11 mb/d.
6. Oil tanker rates surge

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- Oil tanker rates hit a four-month high this week, as a rash of bookings for tankers were recorded in the Middle East, Bloomberg says.
- The tanker bookings could mean that OPEC is stepping up oil exports ahead of its planned cutbacks in early 2017.
- Day rates for oil tankers heading from the Middle East to Asia skyrocketed to $47,479. On top of that, surveys from Bloomberg and Baltic Exchange find that the number of crude tankers in the Persian Gulf dropped to its lowest level in a year.
- Spot cargo bookings hit the highest number for the month of October in at least 12 years.
- “The suspicion is that there’s an extraordinarily high output from the Middle East ahead of the expected cut decision in November,” Erik Stavseth, an analyst at Arctic Securities AS, told Bloomberg. “We see increased exports from Iran, Iraq, Saudi Arabia, Kuwait and also U.A.E.”
7. China’s “hard landing”?

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- China’s economy continues to slow as it transitions from one based on industry to a more service and consumer-oriented society.
- As the graphic above shows, China’s GDP growth is set to average 6.7 percent in 2016, down sharply from 7.8 percent three years ago. There are concerns about a “hard landing” for the Chinese economy, and credit and property bubbles also pose major threats.
- The Economist Intelligence Unit (EIU) predicts a hard landing could occur in 2018. The sharp slowdown would dampen Chinese oil demand, already starting to slow after it throttles back on filling its strategic petroleum reserve.
- The IEA has repeatedly downgraded global oil demand estimates, due to softness in China.
- The EIU predicts oil prices to remain below $65 per barrel through 2021, in part due to a hard landing.
That’s it for this week’s Numbers Report. Thanks for reading, and we’ll see you next week.