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Euan Mearns

Euan Mearns

"Euan Mearns is a geologist and geochemist. In recent years he was a principal at The Oil Drum, the worlds leading energy blog, until it…

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Oil Production Vital Statistics July 2015 – Equilibrium Reached

During May and June the oil price has stabilized and both WTI and Brent spot prices have converged on $60 / bbl; the US oil rig count is still falling, but slowly; oil production from all regions is stable hence global total liquids production is trending sideways on the back of recent sharp rises. It appears that oil market equilibrium has been reached. Past experience tells us that this is unlikely to last long.

  • The IEA have once again revised US production upwards by around 300,000 bpd, backdated to March and this clouds recent movements in the global and US data.
  • World total liquids production down 150,000 bpd to 95.96 Mbpd. The recent trend remains sharply upwards.
  • OPEC production up 50,000 bpd to 31.33 mbpd (C+C)
  • N America production down 320,000 bpd to 19.48 Mbpd after upwards revisions of about 300,000 bpd in the USA
  • Russia and FSU down 30,000 bpd to 14.04 mbpd
  • Europe up 140,000 bpd to 3.32 Mbpd (compared with May 2014)
  • Asia down 50,000 bpd to 7.95 Mbpd (after revisions).
  • Saudi Arabia oil rig count was sharply lower, down 10 in May. The international oil rig count continues to decline while the US oil rig count has stabilized at around 628 units.

Figure 1 Daily Brent and WTI spot prices from the EIA, updated to 22 June 2015. The oil price has fallen asleep in June as both Brent and WTI have converged on $60, the spread has once again closed.

This is the July 2015 edition of Oil Production Vital Statistics. The June 2015 Vital Statistics is here. EIA oil price and Baker Hughes rig count charts are updated to end June 2015, the remaining oil production charts are updated to May 2015 using the IEA OMR data.

Figure 2 Oil price bigger picture. The plunge has not been so severe as in 2008/09 reflecting different causes behind the two price crash events. The 2008/09 crash was associated with the finance crash, unwinding of speculative positions and ensuing recession. The oil price recovery then was led by OPEC slashing production. The 2014/15 crash was caused by over supply of LTO (light tight oil) in the USA and the decision made by OPEC to not cut production to support price. While latent recessionary pressures may have contributed to the crash it seems clear now that low oil price is promoting demand and that increased demand has driven prices marginally higher. The anticipated steep fall in LTO production in the USA has yet to materialise.

Figure 3 Oil and gas rig count for the USA, data from Baker Hughes up to 26 June 2015. The recent top in operating oil rigs was 1609 rigs on 10 October 2014. On 26 June the figure was 628, down 981 or 61%. The rate of fall in oil rig count has slowed appreciably (Figure 4) and the gas rig count has stabilised at around 220 units. The total rig count now stands at 859, 17 units below the low point reached on June 12th, 2009.

Related: This Week In Energy: Oil Prices Under Pressure From All Sides

Figure 4 Detail of the US rig count statistics showing that the decline in oil rig count has slowed appreciably but is still down. The gas rig count has stabilized. US natural gas production has continued to rise as have imports. The data tend to suggest that the US can maintain gas production levels with as few as 220 rigs drilling mainly shale gas. The fall in US LTO production expected by many commentators has yet to materialize. It seems possible that 628 rigs drilling are sufficient to offset declines and maintain constant US oil production in which case the standoff between the USA and Saudi may still have some way to run.

Figure 5 The last three months production figures have once again been subject to significant revision by the IEA. As published, the data suggest effectively flat US production for the last three months, but the whole quarter has been revised upwards by about 300,000 bpd. US oil production now stands at 12.91 Mbpd, down 40,000 bpd on the revised April figure. The growth in US oil production has now perhaps stalled but there is as yet no sign of decline. C+C+NGL = crude oil + condensate + natural gas liquids.

Figure 6 OPEC spare capacity stands at 3.34 Mbpd, 2.09 Mbpd of that in Saudi Arabia. The only other country with significant spare capacity is Iran, all others are pumping flat out. The status of Saudi spare capacity does need to be questioned. “Saudi Arabian Oil Minister Ali Naimi has declared that OPEC will maximize its production at all times.” If that is so, why does Saudi not bring on that additional 2 Mbpd and bury the shale drillers once and for all?

Figure 7 OPEC production plus spare capacity in grey. The chart conveys what OPEC could produce if all countries pumped flat out although, as stated above, the status of Saudi spare capacity needs to be questioned. OPEC production stood at 31.33 Mbpd in May, up 50,000 bpd on April after revisions are taken into account. Libyan production appears to have stabilised at about 500,000 bpd but is still well below former capacity of 1.7 mbpd reached in 2008.

Figure 8 Saudi production rose by 90,000 bpd to 10.25 Mbpd in May. Saudi production is effectively moving sideways since around 2012. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait where production from the Wafra heavy oil field is shared equally between them. The NZ used to pump at over 500,000 bpd in 2013, but this has now effectively fallen to zero suggesting production problems. The heavy oil in the Wafra reservoir is helped to the surface by steam injection. It is possible that this is not economical at $60.

Related: Why Buffett Bet A Billion On Solar

Figure 9 The ME OPEC oil rig count was sharply lower in May. The Saudi count was down 10 and the group down 14. Notably the Saudi gas rig count was up 8. It is difficult to read anything into these figures at present and they most likely reflect cyclical drilling plans.

Figure 10 The international oil rig count continues its slide, which like the slide in US oil rig count, would be expected to impact production at some point. The recent peak in international oil rigs was 1065 in May 2014. That has since fallen 176 (17%) to 889 units in May 2015. These statistics may be clouded by companies that have rigs on contract which are now “stacked” i.e. not being used.

Figure 11 Russia and other FSU oil production remains rock steady effectively glued to 14 M Bpd. Russia is one of the world’s largest producers with 11.04 Mbpd in May 2015, up 30,000 bpd on April. Other FSU was down 50,000 bpd at 3.00 Mbpd after revisions.


Figure 12 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. To get an idea of trend it is necessary to compare production with the same month a year ago. Compared with May 2014, European production is up 140,000 bpd.

  • Norway May 2014 = 1.64 Mbpd; May 2015 = 1.88 Mbpd; up 240,000 bpd YOY
  • UK May 2014 = 0.96 Mbpd; May 2015 = 0.88 Mbpd; down 80,000 bpd YOY
  • Other May 2014 = 0.58 Mbpd; May 2015 = 0.56 Mbpd; down 20,000 bpd YOY

The decline in North Sea production has been arrested and there is little sign yet that the oil price crash has impacted oil production in this sector.

Figure 13
This group of S and E Asian producers has been trending sideways since 2010. The group produced 7.95 Mbpd in May, down 50,000 bpd on the revised April figure.

Related: What Would A Saudi-Russian Partnership Mean For World Energy?

Figure 14 N American production paused in April, mainly on the back of production decline in Canada and Mexico.

  • USA Apr 2015 12.95 Mbpd; May 2015 12.91 Mbpd; down 40,000 bpd
  • Canada Apr 2015 4.33 Mbpd; May 2015 3.99 Mpd; down 340,000 bpd
  • Mexico Apr 2015 2.52 Mbpd; May 2015 2.58 Mbpd; up 60,000 bpd

Group production down 320,000 bpd from April. Note that the US data have been revised upwards by around 300,000 bpd for March and April, hence the short term moves are effectively meaningless. The chart shows N American production turning down, mainly in Canada and Mexico.

Figure 15 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. May production was 95.96 Mbpd down 150,000 bpd on April. This chart shows how supply growth accelerated in 2014 giving rise to the price collapse.

Figure 16 To understand this chart you need to read my earlier posts [1, 2]. The data are a time series and the pattern describes production capacity, demand and price. This chart pattern is not behaving as I anticipated thus far. It was expected that production should fall in response to low price. But instead it has risen. There is on-going debate about the relative contributions of changes in supply and demand to the price crash and subsequent minor recovery. The picture is muddied by continual revisions to data. Figure 15 appears to show that an acceleration in supply growth is a major factor in the price collapse and given recent supply action it is somewhat surprising that the price has not carried on down in recent months. This suggests to me that low price has stimulated demand for cheap oil and that this has contributed to the muted price recovery.

[1] Energy Matters The 2014 Oil Price Crash Explained
[2] Energy Matters Oil Price Scenarios for 2015 and 2016

By Euan Mearns

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