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Oil Storage Levels Point to Lower for Longer

Friday, February 26, 2016

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. OPEC’s war on shale yields results

(Click to enlarge) 

- Much has been made about the ability of U.S. shale companies to weather the downturn in oil prices, and in turn, a lot of commentary has argued that OPEC’s strategy since 2014 has failed.
- But the price crash has had an enormous impact on production figures. Not only has U.S. oil output declined from a peak of 9.6 million barrels per day (mb/d) in April 2015 to below 9.3 mb/d by November 2015, but a more important metric is to measure the decline against a business-as-usual case from mid-2014 when prices began to decline.
- If U.S. production had continued to climb at the pre-June 2014 rate, Reuters analyst John Kemp notes, U.S. production would have reached 11 mb/d by November 2015. In other words, the Saudi strategy of pursuing market share and forcing out high-cost producers knocked at least 1.6 or 1.7 mb/d of American oil offline, a very substantial volume.
- Moreover, output is still falling. The IEA sees U.S. production falling by another 600,000 barrels per day this year.
- In short, the U.S. shale industry has proven to be resilient, but OPEC…




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