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Page added on October 29, 2017

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World Crude Oil Supplies per July 2017

Production

In this post I present developments in world crude oil (including condensates) supplies since January 2007 and per July 2017.

  • In this post the world crude oil (inclusive condensates) supplies is split into three entities, North America [Canada, Mexico and the US], OPEC(13) and other Non OPEC [World – {North America + OPEC(13)}] with a closer look at Brazil.
  • For OPEC(13) a closer look at developments of number of active oil rigs versus developments in the oil supplies. This is supplemented with developments in the oil supplies versus the number of active oil rigs for some selected OPEC countries.
  • Looking at figure 07 for OPEC(13) the increase in its supplies as of late 2014/early 2015 followed a period with noticeable growth in oil rigs and likely capacity expansions/modifications of oil process/treatment facilities.
    The accompanying increase in OPEC(13) supplies may simply have been rationalized from a pure business desire to recover the investments (CAPEX) from these capacity expansions.
  • Finally a closer look at developments in petroleum consumption/demand and stock changes for the Organization for Economic Cooperation and Development (OECD).
    The OECD has about half of total global petroleum consumption and a major portion of the global petroleum stocks.
  • “It took a lot of costly oil to bring down the oil price. This is the magic from lots of cheap credit.”

Data from this post is primarily from EIA Monthly Energy Review October 2017.

Figure 01: Figure 1: The stacked areas in the chart above shows changes to crude oil supplies split with North America [North America = Canada + Mexico + US], OPEC and other non OPEC [Other non OPEC = World – (OPEC + North America)] with January 2007 as a baseline and per July 2017. Developments in the oil price (Brent spot, black line) are shown against the left axis.

It was the oil companies’ rapid growth in CAPEX leveraged by cheap debt [ref US Light Tight Oil (LTO)] and expectations of a sustained higher oil price that brought about a situation where supplies started to run ahead of consumption/demand that brought the oil price down. During the run up to the oil price collapse, supplies also grew from other non OPEC (ex North America) from developments sanctioned while the oil price was high and expected to remain so.

Following the oil price collapse several of these developments had to take considerable write downs.

This coincided with increased OPEC supplies in what became widely explained as a bid from OPEC for market share.

Annualized and YTD 2017, only OPEC(13) has shown growth in crude oil supplies and this is after the agreed cuts was implemented as from the start of 2017.

As from the start of 2017 OPEC(13) put into effect an agreed cut in supplies of 1,2 Mbo/d together with some concessions (of about 0,6 Mbo/d, according to public figures, from some non OPEC countries) in an effort to accelerate the balancing of supply and demand and regain support for the oil price.

Libya and Nigeria were exempted from these cuts.

The CAPEX cycle created during the period with lasting high oil prices will towards 2020 continue to add capacity from a shrinking portfolio of sanctioned developments that remains in the pipeline. This is now believed to primarily offset decline from legacy production.

Any meaningful growth in the oil companies CAPEX (sanctioned developments, FIDs [FID; Final Investment Decision]) will require a sustained oil price above $60/bo.

As most developments take 2-4 years from being sanctioned to flow, this introduces a time lag as from when new sanctioned developments will add to supplies. The exception here is US LTO that has an edge due to its short response time.

Growth in oil supplies was a result from a lasting, high oil price also facilitated by the world’s major central banks low interest policies and fiscal deficit spending. Low interest policies allowed for an unprecedented growth in credit that supported both consumers (demand) and suppliers of oil.

A big portion of the oil companies’ portfolios of discoveries and infield/infill drilling that met the sanction hurdle of $60/bo were mostly expended while the oil price was expected to remain at or above $100/bo and the results from the recent years’ exploration has replaced a fraction of what was extracted.

World Crude Oil Supplies

Figure 02: The stacked areas in the chart shows development in crude oil supplies split on some economic entities from January 2007 and per July 2017. The oil price [Brent spot] is shown against the left axis.

Growth in oil supplies from sanctioned developments while the oil price was high and expected to remain so, collapsed the oil price.

North America

Figure 03: The stacked areas in the chart show crude oil supplies from North America [Canada, Mexico and the US] versus the oil price (Brent spot) from January 2007 – July 2017.

Crude oil supplies from the US, buoyed by unprecedented amounts of debts for Light Tight Oil (LTO) extraction, reached a high of 9,6 Mbo/d in April 2015 and was about 0,4 Mbo/d lower in July 2017.

Other Non OPEC

Figure 04: The stacked areas show oil supplies from other Non OPEC (Rest of World – [OPEC(13) + North America) from January 2007 and per July 2017. The areas show some individual countries and the rest are lumped together (yellow).

Looking at other Non OPEC ex Russia (total inclusive United Kingdom in the chart), these producers collectively started to decline as the oil price grew back in 2010. The lasting higher oil price started a debt fueled CAPEX cycle for infield/infill drilling and sanctioning of developments of discoveries that the oil companies’ held in their portfolios.

During late 2014/early 2015 the concerted efforts from this growth cycle in CAPEX came to fruition, the combined production of these other Non OPEC countries (ex Russia) started to grow in October 2014. These other Non OPEC countries (still ex Russia) reached a high in December 2015 of 21,2 Mbo/d and was down with more than 1 Mbo/d (4%) in July 2017.

Non OPEC had a high of 47,0 Mbo/d in December 2015 and was down to 45,7 Mbo/d by July 2017.

Brazil

Data for Brazil are from Agência Nacional do Petróleo.

Figure 05: The chart shows development in oil extraction in Brazil as of January 2000 and per August 2017 [green area and right hand scale]. The oil price (Brent spot and black line on the left hand scale).

Brazil recently entered a new growth cycle in crude oil supplies while the oil price was high and is expected to show more growth in their crude oil supplies for the next few years. Growth comes from sanctioned developments still in the pipeline and recently the Sepia development was sanctioned with a scheduled start up in 2021.

OPEC(13) and the Oil Price

Equatorial Guinea became a member of OPEC(14) as of May 2017. EIA is as of now not reporting data on Equatorial Guinea.

Figure 06: The stacked areas show development in crude oil supplies from OPEC(13) and the color coding and grading for individual countries. Green for Africa, yellow for South America and red for Middle East plotted versus the right hand scale. The oil price (Brent spot) is plotted versus the left hand scale.

Figure 06 shows that just prior to and with the oil price collapse, OPEC(13) started to grow their oil supplies from 32,5 Mbo/d in June 2014 to 36,0 Mbo/d in November 2016.

In comparison, North America increased its supplies (crude oil and condensates) from 14,7 Mbo/d to 15,1 Mbo/d during he same period, with a high of 15,8 Mbo/d in February 2015, refer also figure 03. In July 2017 North America was at 15,2 Mbo/d.

Was the growth in oil supplies from OPEC a bid for market share or is the explanation, like for most other things, more complex (ref also figure 07 below)?

With the Libyan civil war, starting in February 2011, Libyan oil supplies collapsed and a tight supply situation became tighter and an already high oil price rapidly gained another $20/b, which it gave up as OPEC increased its oil supplies as of April 2011. Non OPEC, led by  North America, started to grow its oil supplies as of October 2012.

By April 2012 OPEC reached a high as most of the Libyan oil supplies were temporarily brought back. This high was surpassed in June 2015.

The sanctions against Iran reduced its supplies about 1 Mbo/d from 2012 and until these were eased in 2016.

Iran now rivals Iraq in oil supplies.

OPEC had a high in oil supplies of 34,0 Mbo/d in July 2008 as the (monthly) oil price reached its apex and reached a new high with 36,0 Mbo/d in November 2016, more than 8 years later.

OPECs oil supplies in July 2017 was at 35,5 Mbo/d as Iran, Libya and Nigeria’s oil supplies totaled 0,9 Mbo/d more than in November 2016. That explains the recent uptick in OPEC oil supplies.

Libya and Nigeria (exempted from the cuts) have increased their supplies with a total of 0,7 Mbo/d since December 2016.

OPECs African and South America members have declined from 10,6 Mbo/d in 2010 and are now (re)growing towards 9 Mbo/d.

It will require a high oil price, considerable CAPEX and take some time to grow total supplies for OPEC members in Africa and South America to the levels of late previous decade.

OPEC(13) and number of Oil Rigs

The growth in no of oil rigs (ex Iran and Iraq) in OPEC was from about 170 in 2005 to an average of about 300 in 2014/2015.

Rig data from Baker Hughes.

Figure 07: The stacked areas show development in crude oil supplies from OPEC(13) and the color coding and grading for individual countries. Green for Africa, yellow for South America and red for Middle East plotted versus the right hand scale. The individual countries active oil rigs (from (Baker Hughes) are shown as stacked lines and plotted versus the left hand scale.
NOTE: Baker Hughes does not report rigs for Iran and for Iraq as of June 2012 (which explains the upward jump in June 2012).

Following the oil price collapse in the summer of 2014 the number of oil rigs within OPEC(13) dropped significantly while oil supplies, primarily from the Middle Eastern OPEC members, grew with about 4 Mbo/d from the summer of 2014 to end of 2016. Supplies were curtailed as agreed cuts were implemented as from 2017.

From June 14 to February 15 Iraq reduced their number of oil rigs from 96 to 56 which explains much of the sharp decrease in the number of oil rigs in OPEC.

OPEC oil supplies started a downward trend in June 2012, because of more above ground factors, this time sanctions against Iran. This while the number of oil rigs was increasing and the oil price remained high. By April 2014 this trend in oil supplies was reversed, and OPEC posted a steady growth in oil supplies of more than 2 Mbo/d until the recent agreed cuts were implemented following a period with a noticeably lower oil price.

Some selected OPEC countries

Figure 08: The chart shows crude oil supplies from Libya versus the number of oil rigs since January 2007.

Libya has suffered from wars and social strifes since 2011 which also has affected its oil supplies.

Libya was above 1 Mbo/d in July 2017 and is from several sources expected to reach 1,2 – 1,3 Mbo/d in the near future. It is now believed that it requires operation of several oil rigs and some time before Libya again will reach oil supply levels prior to the war.

Looking at developments in oil supplies and the number of oil rigs, two OPEC members stood out, Kuwait and United Arab Emirates (UAE).

In 2005 Kuwait and UAE totaled about 30 rigs which grew to a recent total of about 90 while delivering noticeable growth in oil supplies post the oil price collapse. Note that the number of oil rigs remained high after the agreed OPEC cuts went into effect as of January 2017.

Figure 09: The chart shows crude oil supplies from Kuwait versus the number of oil rigs since January 2007.

Figure 10: The chart shows crude oil supplies from United Arab Emirates (UAE) versus number of oil rigs since January 2007.

Figure 11: The chart shows crude oil supplies from Saudi Arabia versus the number of oil rigs since January 2007.

It appears, from looking at the number of oil rigs in Saudi Arabia, that it takes a high(er) number of rigs to sustain and grow oil production, and the number of oil rigs remained high as OPEC(13), led by Saudi Arabia increased its supplies with about 1 Mbo/d over a 2 year period post the oil price collapse.

Figure 12: The chart shows crude oil supplies from Iraq versus the number of oil rigs since January 2007.
NOTE: Baker Hughes reports data on oil rigs in Iraq as from June 2012.

Developments in number of oil rigs in Iraq during the summer of 2014 is interesting as the significant drop in the number of oil rigs apparently coincided with the growth in OPEC supplies and the following collapse in the oil price.

The chart also illustrates that it required a considerable amount of active oil rigs to grow Iraq’s oil supplies.

OECD Petroleum Consumption

Figure 13: The areas in the chart show the development in petroleum consumption for the US [red area], OECD Europe [yellow area], and other OECD (which includes Canada, Japan and South Korea) [blue area]. The chart is complemented with lines showing smoothed 12 month moving averages (12 MMA) for the presented OECD countries/regions. The oil price (Brent spot) black dotted line, is shown against the left axis.

Annualized growth in OECD petroleum consumption per July 2017 hovered around 1,0 – 1,5%, led by Europe with about 2%, while oil prices (Brent spot) remained at about $50/bo.

Japan has experienced a decline of about 10% in its petroleum consumption over the recent 3 years.

OECD petroleum stocks

Figure 14: The stacked areas show development in OECD petroleum stock developments since January 2007 and per July 2017. Data for US includes SPR.

As per July 2017 total OECD petroleum stocks were about 350 Mb over the 5 year average before the 2014 oil price collapse.

Figure 15: The chart show developments in US total petroleum stocks (stacked area, right hand scale) by products since January 2014 and per October 20th 2017. Data are exclusive SPR.
Developments in the oil price (WTI) are shown as a black line against the left hand scale.

In the US petroleum stocks has continued to decline and are now about 60 Mb lower than in June 2017, ref also figure 15 above. For the US it should be expected the data may still be subject to the effects of the aftermaths of the hurricanes that caused outages of production in Texas and Gulf of Mexico and refineries in the Gulf area.

FRACTIONAL FLOW by Rune Likvern  



6 Comments on "World Crude Oil Supplies per July 2017"

  1. Anonymous on Sun, 29th Oct 2017 5:56 pm 

    This stuff is unreadable. It’s not even that I disagree with this guy because he is a peaker. I disagree with Ron Patterson or Mason Inman too. But when they write, I can read what they say. But Rune is so miserable that no one will really read his work.

    1. Very pompous, wordy writing style.

    2. Lacks good organization, topic sentences, etc.

    3. Makes MANY points where you would expect a graph or table (e.g. Capex levels) and it is just missing from the article. Causing a “huh” factor.

    4. The stacked area charts are very hard to read. Also they appear to have errors. (how is JUL12 red area both above and below the reference mark?)

    I’m totally into throughful detailed data analysis. But this is so miserable, I can’t keep my eyeballs struggling through the page to even comment on it.

    I guess I should not be surprised. Peakers tend to be old losers and cranks. So the writing sucks…goes with the pattern.

  2. rockman on Sun, 29th Oct 2017 8:08 pm 

    Anon – I have to agree. Presenting chart after chart with no detailed interpretation (whether I agree with it or not) isn’t worth my time to decipher. Also I didn’t notice any effort to take into account time lags. But I did skim fast.

  3. Allan on Sun, 29th Oct 2017 9:04 pm 

    10 years ago peak oil experts predicted that in 2017 Mexico would turn into net oil importer.
    Now I see its production at about 2 mbpd, and export 1 mbpd.
    Probably we have to wait another 10 years for Mexico to stop exporting oil.

  4. tita on Mon, 30th Oct 2017 7:37 am 

    Took me a while to understand the first graph. When you stack various production growth from a base date, you can’t actually fill a negative growth, which is why we don’t understand why OPEC production is sometimes in negative territory… It is not, it’s just that the NON-OPEC is negative, and OPEC production start from this line.

  5. Babtized on Mon, 30th Oct 2017 11:10 am 

    I take away from this article, something different than the author intended. I read it as the whole world is really based on physical oil. Created money, credit, debit,etc., is just ways to get some.

  6. westexas on Wed, 1st Nov 2017 8:20 pm 

    Assuming no change in consumption, Mexico’s net exports (total petroleum liquids) will be down to 0.3 to 0.4 million bpd in 2017, versus 1.9 million bpd in 2004, a decline in net exports of approximately 80%, relative to 2004, versus a production decline of about 40%, AKA “Net Export Math.”

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