A joint venture between BP…
The unlikely return of full…
This is the third in a monthly series of posts chronicling the action in the global oil market in 13 key charts. The February 2015 post is here. EIA oil price and Baker Hughes rig count charts are updated to end February 2015, the remaining oil production charts are updated to January 2015 using the IEA OMR data. The main oil production changes from December to January are:
1. Global oil production has now been flat, just over 94 Mbpd since September 2014 (5 months).
2. The fall in the oil price reversed in February. The low point for Brent and WTI was reached on 13th January when Brent hit $45.13. The bounce came on news of plunging US drilling rig count but has been much more muted for WTI compared with Brent. The US glut of LTO appears to continue.
3. The main dynamic statistic has been the plunge in US oil rig count down 237 rigs for the month of February. Gas rig count is also heading down at the more sedate rate of 39 rigs for the month.
4. I anticipate that the price bottom may be in but that price will bounce sideways along bottom for several months until we see significant falls in OECD production. Whilst there are clear signs that production growth has halted there is, as yet, little sign of production falling.
5. Iraq and Libya combined were down 370,000 bpd in January. This may account for part of the bounce in price.
Figure 1 Daily Brent and WTI prices from the EIA, updated to 23 February 2015. Brent reached a low of $45.13 on 13th January and has since staged a modest recovery. It remains to be seen if the bottom is in. It is difficult to see the detail of recent action at this scale, so an expanded Y-axis chart is given below the fold.
Figure 2 On 13th January both WTI and Brent reached lows and the WTI-Brent spread closed completely and was temporarily reversed. Since then Brent has staged a much stronger recovery than WTI, the former rising $14.7 (32.6%) to 23rd Feb, the latter rising a meager $3.64 (7.9%). While speculation is likely playing a role in the short term moves, the underlying situation of a glut of LTO in the USA persists as is borne out by the production figures detailed below.
Figure 3 Oil and gas rig count for the USA, data from Baker Hughes up to 27 February 2015. The recent top in operating oil rigs was 1609 rigs on 10 October 2014. On February 27th the count was down 623 to 986 units. The oil rig count is down 237 for the month of February. The drilling slowdown has yet to show up significantly in US oil production statistics (Figure 4). A backlog of wells already drilled are being fracked and hooked up. The gas rig count that was stable is now also heading down with a fall of 39 rigs for the month of February. It will be interesting to see when the US gas imports from Canada begin to rise.
Figure 4 US oil production stood as 12.32 Mbpd in January 2015. Production appears to have stopped rising and has been flat at 12.3 Mbpd for 4 months. C+C+NGL = crude oil + condensate + natural gas liquids.
Figure 5 The full OMR has not yet been published and I am unable to update this chart. But there is little change in OPEC production, hence there will be little change in spare capacity. The chart will be updated when the data are published.
Figure 6 OPEC production plus spare capacity (calculated) is in grey. The chart conveys what OPEC could produce if all countries pumped flat out. Production in January was down a meager 240,000 bpd, all of that in Iraq and Libya who combined were down 370,000 bpd since December. There is absolutely no sign of the healthy OPEC nations cutting production although Algeria is showing signs of struggling to maintain production levels.
Figure 7 Saudi production is rock steady and stood at 9.69 Mbpd in January, up 70,000 bpd from December. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait and is shared equally between them.
Figure 8 Russia remains one of the World’s largest producers with 10.95 Mbpd in December 2014, down 40,000 bpd on November. Other FSU also ticked down 30,000 bpd in December.
Figure 9 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 January 2014, UK+Norway production is down 40,000 bpd.
The steep declines appear to have been arrested and, with several new major projects in the pipeline, North Sea production was expected to rise in the years ahead. The current price rout is bound to have an adverse impact and activity in the North Sea is winding down rapidly as companies enact major redundancies in the workforce.
Related: Bakken Decline Rates Worrying For Drillers
Figure 10 China is a significant though not huge oil producer and has been producing on a plateau since 2010. Production was 4.14 Mbpd in January up 50,000 bpd from December. This group of S and E Asian producers have been declining slowly since 2010. The group produced 7.60 Mbpd in January, up 60,000 bpd on December.
Figure 11 N American production is slowing down and is essentially flat from December to January. At some point the plummeting rig count will bite.
Group production down 10,000 bpd from December.
Figure 12 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. January production was 94.07 Mbpd down 40,000 bpd on December. Production has been effectively flat, just above 94 Mbpd for 5 months but remains above the long-term trend line, still symptomatic of over-supply.
Figure 13 To understand this important 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. The January data confirm my earlier inkling that both over supply and weak demand underpin the price rout.
By Euan Mearns of http://euanmearns.com/
More Top Reads From Oilprice.com:
"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…