It is becoming increasingly difficult to make sense of the global production figures in light of events and IEA revisions. The July 2016 global total liquids figure has been subject to a large upwards revision to 97.45 Mbpd, leaving it just 10,000 bpd short of the all time record set in November 2015 (see chart). The figure recorded in August for July was 97.01 Mbpd, so it has been revised up by 440,000 bpd over the last 3 months.
The post-November 2015 production decline was accentuated by the Fort McMurray wild fire in Canada in May 2016. But overprinting all this is Iran coming back to full production with a YOY rise of 760,000 bpd combined with large rises in Saudi and Russian production.
The oil price is pressing on its $51 / bbl resistance. With OPEC spare capacity approaching lows and global production fast approaching balance, we can look forward to a rally in the oil price towards $65 / bbl (perhaps higher) some time in 2017.
The following totals compare September 2016 with September 2015:
- World Total Liquids +530,000 bpd
- OPEC +720,000
- Russia + FSU +300,000
- Europe -50,000 bpd
- Asia -570,000
- North America -690,000
The net figures from the above are +1.02 Mbpd and -1.31 Mbpd leaving a net -0.29 Mbpd decline that does not tally with the + 0.53 Mbpd global total liquids figure. The data I track does not capture all global production. But there is something rather strange going on with the data that merits investigation.
Year on Year, OPEC and Russia are the big winners. North America and Asia the big losers. And on the drilling front:
- US total rig count up 163 to 567 from the low of 27 May
- International rigs up 6 since last month
This article first appeared on Energy Matters.
EIA oil price and Baker Hughes rig count charts are updated to the end of October 2016, the remaining oil production charts are updated to September 2016 using the IEA OMR data.
Figure 1 The near term peak in the oil price (WTI and Brent) was on the 8th of June at $51. Since then the price has fallen and then rallied towards resistance at $51 on two occasions. With rising bottoms, the chart beckons a break above $51 within months as the market marches relentlessly towards balance (see Figure 17).
Figure 2 A significant break above the diagonal trend line should see a rally towards $65, sufficient to send the frackers back to work.
Figure 3 The rally in US drilling has been sustained with the total rig count rising for 19 consecutive weeks. Since the beginning of October, oil directed rigs are up 25 to 450 and gas directed rigs are up 21 to 117. The combined count is down 204 from one year ago.
Figure 4 Total US rigs are up 163 to 567 from the near term low of 404 seen on 27 May 2016.
Figure 5 The near-term peak in US production was 13.24 Mbpd in April 2015. The September 2016 figure was 12.18 Mbpd, down 1.06 Mbpd from that peak and down a significant 80,000 bpd from last month. The decline in US oil production appears to be accelerating. But accelerating decline will eventually be cancelled by the now rising drilling activity.
Figure 6 OPEC production, led by Saudi Arabia, continues to rise and set new records each month. Libya remains effectively off line. OPEC up 30,000 bpd since last month and up 720,000 bpd year on year.
Figure 7 OPEC spare production capacity continues to slide and now stands at 2.14 Mbpd. Only Saudi Arabia and Libya are now deemed to hold significant spare capacity. Spare capacity is down 1.13 Mbpd year on year. Slender spare capacity is a bullish signal going forward but will only come into play once the market has rebalanced and inventories are depleted.
Figure 8 Saudi Arabia production was down 50,000 bpd in September but is up 400,000 bpd year on year.
Figure 9 Iran’s production has stabilised at just over 3.6 Mbpd. September was down 10,000 bpd on the previous month. The chart shows how spare capacity was converted to production and that the IEA showed great skill in estimating the former. Iran’s production is up 760,000 bpd year on year.
Figure 10 ME OPEC rigs were up 6 to 160 in Sep, one short of the 161 high point of March 2015.
Figure 11 The international oil rig count was up 6 to 684 in September. Europe, Africa and Asia lost rigs while the Middle East and Latin America gained rigs.
Figure 12 Russia + other FSU up 610,000 bpd since August to 14.22 Mbpd. Up 300,000 bpd year on year. These numbers look dodgy. August’s numbers were depressed contributing to the massive monthly rise. Expect these numbers to be significantly revised.
Figure 13 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. Group production is down 50,000 bpd year on year to 3.26 Mbpd.
Figure 14 Group production up 70,000 bpd to 7.39 Mbpd since last month. Down 570,000 bpd year on year. The plateau in this region’s production is well and truly bust, led by Chinese oil production decline.
Figure 15 Canada has all but recovered from the Fort McMurray wild fire. Group production is down 230,000 bpd since August to 18.94 Mbpd. Down 690,000 bpd year on year.
Figure 16 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. Production is up 610,000 bpd since August. Up 530,000 bpd year on year.
Figure 17 Stock change = global total liquids production less demand. 2Q figures are impacted by -620,000 bpd in Canada in May, resulting from the Fort McMurray wild fire. But the market is heading back towards balance with forces driving different parts of the market in different directions.
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