Most regions experienced production losses in March with the exceptions of Iran (+80,000 bpd) and Europe (+90,000 bpd compared with a year ago). Total liquids were down -260,000 bpd for a loss of -990,000 bpd since the peak last July. The oil price rally has continued with WTI on $44 as I write. While many signs point to the worst of the rout being over it remains premature to declare that it is over.

Drilling continues to decline across the board with US oil+gas rigs = 420, this is the lowest level of US drilling for over 20 years. Two strongly opposing forces control the near and medium term destiny of the oil market. The collapse in drilling must surely lead to an acceleration of production decline near term. Offset by the ever present risk of shale drillers returning to action on the back of a continued price rally.

The following totals compare March 2016 with February 2016:

  • World Total Liquids down 260,000 bpd
  • USA down 90,000 bpd
  • North America down 220,000 bpd (includes USA)
  • OPEC down 100,000 bpd
  • Saudi Arabia down 40,000 bpd
  • Iran up 80,000 bpd
  • Russia + FSU down 30,000 bpd
  • Europe up 90,000 bpd (YOY)
  • Asia no change.

This article first appeared on Energy Matters.

EIA oil price and Baker Hughes rig count charts are updated to the end of April 2016, the remaining oil production charts are updated to March 2016 using the IEA OMR data.


Figure 1 The oil price rally is losing momentum and may form another head. The day that supply and demand come into balance is drawing ever closer. But there is the overhang of crude oil stocks and the risk that higher prices send frackers back to work.
Figure 2 At this scale, the oil price recovery is brought into perspective. The price needs to break above $50 to be ‘sure’ that the current price crisis is over.


Figure 3 Not updated from last month.


Figure 4 The US oil and gas rig count continues to plunge with relatively little impact upon production.


Figure 5 Stacking the lines from Figure 4 shows that US drilling has now declined below any level seen for over 20 years.


Figure 6 The near-term peak in US production was 13.24 Mbpd in April 2015. The March 2016 figure was 12.57 Mbpd, down 670,000 bpd from that peak and down 90,000 bpd from last month that to large extent reflects data revisions. The decline in the USA represents 68% of the total global decline.


Figure 7 OPEC production has been rock steady for 12 months (dashed line) and currently stands at 31.75 Mbpd, down 100,000 bpd on Februray. New OPEC member Indonesia is included in the Asia chart (Figure 15), since changing baselines distorts the picture.


Figure 8 With the exception of Saudi Arabia and Iran, OPEC spare capacity is now all but zero. Iran has been slowly ramping up production and Iranian spare capacity is now in decline (Figure 10). In February and March, production declined in the UAE and Iraq by 440,000 bpd resulting in an uptick in the spare capacity of those countries. The reason given by the IEA is unexpected outages but this coincidentally more than offsets the rise in production from Iran.


Figure 9 In March, Saudi production stood at 10.19 Mbpd, down 30,000 bpd on Februray. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait where production from the Wafra heavy oil field is now effectively zero. Saudi Arabia is effectively pumping at capacity. The fabled 2 million bbls per day spare capacity is either a figment of imagination or heavy oil that has no refining market.


Figure 10 The pace of increase in Iranian production slowed in March to +80,000 bpd with production standing at 3.3 M bpd. This is 720,000 bpd above the 2013 low point. This substantial increase in Iranian production must certainly have contributed to the price collapse. Poor relations between Iran and Saudi Arabia don’t help with Saudi Arabia expecting sanctions-hit Iran to freeze production at the reduced January level.


Figure 11 Unlike everywhere else, drilling activity in ME OPEC remains high with 144 rigs operating in these 4 countries. Iran and Iraq are not included since their drilling history is so scarred by wars and sanctions this distorts the picture.


Figure 12 The international oil rig count continues its decline, down another 25 in March. While US rigs are now below levels seen in the 1999 crash (Figure 5), international rigs, which include the robust Middle East, have a long way to go before they reach that level. The reasons for this would be a good topic for discussion in comments.


Figure 13 Russia and other FSU produced 14.16 Mbpd in March, down 30,000 bpd but effectively unchanged because of revisions to the February number and little changed for 3 years (dashed line). Close examination shows that Russian production has been rising slowly while other FSU has been falling slowly.


Figure 14 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. We are now on the cycle high, and North Sea production may fall in the coming months as maintenance programs get under way. New data and data revisions now show that the North Sea has been turned around, with production rising slowly. Several years of $100 oil and record investment has paid off while at the same time contributing to the oil price crash.

To get an idea of trend it is necessary to compare production with the same month a year ago. European production is up 90,000 bpd to 3.57 Mbpd compared with a year ago.

  • Norway Mar 2015 = 1.95 Mbpd; Mar 2016 = 2.04 Mbpd; up 90,000 bpd YOY
  • UK Mar 2015 = 0.95 Mbpd; Mar 2016 = 1.00 Mbpd; up 50,000 bpd YOY
  • Other Mar 2015 = 0.58 Mbpd; Mar 2016 = 0.53 Mbpd; down 50,000 bpd YOY


Figure 15 This group of S and E Asian producers has been trending sideways since 2010 but it has been trending down for the last year. The group produced 7.65 Mbpd in March, identical to the February Figure. Note that Indonesia (an oil importer) has rejoined OPEC. The OPEC production numbers are reported ex NGL by the IEA and this has meant a 170,000 bpd drop in reported Indonesian production.


Figure 16 N American production topped in April 2015 at 20.12 Mbpd. Group production now stands at 19.57 Mbpd down 220,000 bpd on last month (revisions) and down 550,000 bpd from the April 2015 peak. This remains a trivial decline but at some point the collapse in US drilling is going to bite hard (Figures 4 and 5). And it will be interesting to see to what extent the Fort McMurray fire impacts tar sands production, if at all.


Figure 17 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. March production was 96.09 Mbpd down 260,000 bpd on the revised February figure and down 990,000 bpd from the July 2015 peak. There is still a way to go before production gets below the long-term dashed trend line.


Figure 18 Last month a reader asked that I re-instate this chart, so here it is (the donate button is top right) ;-). One of the things this chart shows is the astonishing increase in production capacity by 10 Mbpd since 2011. As described in The 2014 Oil Price Crash Explained, a relative movement between supply and demand of the order 4 Mbpd will be required to reinstate high price. So far supply has dropped about 1 Mbpd and demand is rising at a rate of 1.2 Mbpd per annum (IEA OMR). But there is a risk that supply is elastic to price as high cost production is brought back on and the frackers go back to work as the price rises. This would move the trend to the right rather than upwards.


Figure 19 Global stock changes reflect the imbalance between supply and demand. The surplus was equivalent to 1.5 Mbpd in the first quarter. Global production has fallen by roughly 1 Mbpd since last July, 9 months ago. At this rate, the market will remain over-supplied for the remainder of this year reinforcing the view that the current price rally may be rather premature.

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