TPH view: https://vimeo.com/187401085/833dc64725
My take is that oil prices will flop around until we get clarification of the OPEC + Russia agreement to curb oil supply. It if is a meaningful cut, we should see oil rapidly move up to $60/Bbl, which is the price that I am assuming in all of my forecast/valuation models.
As you can see in the video, there is clear evidence that the global oil market is on-track to be short oil as soon as year-end 2017.
Oil Market Update Video
Oil Market Update Video
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Market Update Video
Comments from John White, energy sector analysts at Roth Capital. John attends most of our luncheons in Houston and he is kind enough to send me his comments on the market each Monday.
Crude Oil/Macro: The IEA said in its August report it expected world oil demand to grow at a rateof 1.2 million b/d next year, keeping its forecast unchanged from last month, but cut its estimate of growth in 2016 by 40,000 b/d to around 1.2 million b/d, from around 1.3 million b/d last month.
The IEA forecast a decline of 900,000 b/d in non-OPEC output in 2016 to 56.6 million b/d, and expects a rise of 400,000 b/d in 2017. Global stockpiles fell for the first time since March, down 10 million barrels to 3.092 billion barrels, just shy of July's record 3.111 billion barrels. "The fall in stockpiles was largely driven by crude, which fell in all OECD regions and especially sharply in Asia Oceania. This brought crude stocks back to early February levels. Refined product stocks across the OECD hit yet another historic high as refineries increased runs in August," the IEA said. "If OPEC sticks to its new target, the market's re-balancing could come faster." "At this stage, it is difficult to assess how the OPEC supply cut, if enforced, will affect market balances," the agency added. "A significant rebound in production from Libya and Nigeria and further growth from Iran would suggest that bigger cuts would have to be made by others, such as Saudi Arabia, to meet the production target." OPEC members meet next month in Vienna.
Global oil supply could fall in line with demand more quickly if OPEC and Russia agree to a steep enough cut in production, but it is unclear how rapidly this might happen, the IEA said on Tuesday. Iran is recovering market share after years of Western sanctions, in Libya, civil unrest has cut production and a series of attacks on oil infrastructure have curtailed Nigerian supply. All three are expected to be exempt from any coordinated cuts, meaning that the onus will likely rest on some of the higher-producing members, such as Saudi Arabia and Iraq.
As reported by Bloomberg, China’s crude imports rose to a record as a new strategic reserve site became operational and refineries prepare to process more oil. China imported 8.08 million b/d in September, according to data released by the General Administration of Customs on 10/13/2016.
On 10/12/2016, Reuters advised of record Indian crude imports, which rose 4.4% in September from the previous month to a record high 4.47 million b/d and surged 17.7% from a year ago.
On 10/12/2016, OPEC reported an increase in its oil production in September to the highest in at least eight years according to Reuters. OPEC produced 33.39 million b/d last month, up 220,000 b/ d from August, OPEC said in a monthly report. The report showed the supply boost in September mostly came from Libya and Nigeria, which are restoring output after disruptions, and from Iraq.
E&P Equities: The WTI crude oil prompt month contract advanced 1.1% for the week, although E&P stocks, as measured by the XOP, did not follow and were down 1.8% for the week. Nevertheless, E&P stocks have been performing well, with the XOP up 5.5% over one month, 7.4% over three months and a very robust 24.6% year to date.
The focus in 2016 has been on all things Permian, and it shows in the stocks. In our Permian peer group, for the one week period, nine of the 11 names outperformed the XOP, for the one month period, all 11 outperformed, for the three month period eight of the 11 outperformed, and for the 12 months, 10 of the 11 outperformed.
Crude Oil/Macro: The IEA said in its August report it expected world oil demand to grow at a rateof 1.2 million b/d next year, keeping its forecast unchanged from last month, but cut its estimate of growth in 2016 by 40,000 b/d to around 1.2 million b/d, from around 1.3 million b/d last month.
The IEA forecast a decline of 900,000 b/d in non-OPEC output in 2016 to 56.6 million b/d, and expects a rise of 400,000 b/d in 2017. Global stockpiles fell for the first time since March, down 10 million barrels to 3.092 billion barrels, just shy of July's record 3.111 billion barrels. "The fall in stockpiles was largely driven by crude, which fell in all OECD regions and especially sharply in Asia Oceania. This brought crude stocks back to early February levels. Refined product stocks across the OECD hit yet another historic high as refineries increased runs in August," the IEA said. "If OPEC sticks to its new target, the market's re-balancing could come faster." "At this stage, it is difficult to assess how the OPEC supply cut, if enforced, will affect market balances," the agency added. "A significant rebound in production from Libya and Nigeria and further growth from Iran would suggest that bigger cuts would have to be made by others, such as Saudi Arabia, to meet the production target." OPEC members meet next month in Vienna.
Global oil supply could fall in line with demand more quickly if OPEC and Russia agree to a steep enough cut in production, but it is unclear how rapidly this might happen, the IEA said on Tuesday. Iran is recovering market share after years of Western sanctions, in Libya, civil unrest has cut production and a series of attacks on oil infrastructure have curtailed Nigerian supply. All three are expected to be exempt from any coordinated cuts, meaning that the onus will likely rest on some of the higher-producing members, such as Saudi Arabia and Iraq.
As reported by Bloomberg, China’s crude imports rose to a record as a new strategic reserve site became operational and refineries prepare to process more oil. China imported 8.08 million b/d in September, according to data released by the General Administration of Customs on 10/13/2016.
On 10/12/2016, Reuters advised of record Indian crude imports, which rose 4.4% in September from the previous month to a record high 4.47 million b/d and surged 17.7% from a year ago.
On 10/12/2016, OPEC reported an increase in its oil production in September to the highest in at least eight years according to Reuters. OPEC produced 33.39 million b/d last month, up 220,000 b/ d from August, OPEC said in a monthly report. The report showed the supply boost in September mostly came from Libya and Nigeria, which are restoring output after disruptions, and from Iraq.
E&P Equities: The WTI crude oil prompt month contract advanced 1.1% for the week, although E&P stocks, as measured by the XOP, did not follow and were down 1.8% for the week. Nevertheless, E&P stocks have been performing well, with the XOP up 5.5% over one month, 7.4% over three months and a very robust 24.6% year to date.
The focus in 2016 has been on all things Permian, and it shows in the stocks. In our Permian peer group, for the one week period, nine of the 11 names outperformed the XOP, for the one month period, all 11 outperformed, for the three month period eight of the 11 outperformed, and for the 12 months, 10 of the 11 outperformed.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Re: Oil Market Update Video
"The IEA forecast a decline of 900,000 b/d in non-OPEC output in 2016 to 56.6 million b/d, and expects a rise of 400,000 b/d in 2017."
What are the components of change that lead to an increase in 2017? Are there huge projects in the pipeline that are independent of price?
Bob
What are the components of change that lead to an increase in 2017? Are there huge projects in the pipeline that are independent of price?
Bob
Re: Oil Market Update Video
They are assuming higher prices. There is little chance oil production will go up if the price of oil stays at $50/bbl.
Production decline in the U.S. has slowed because more DUCs are being completed as companies want to get those locations into their proven reserves.
Keep in mind that demand goes up by AT LEAST a million barrels per day each year.
Production decline in the U.S. has slowed because more DUCs are being completed as companies want to get those locations into their proven reserves.
Keep in mind that demand goes up by AT LEAST a million barrels per day each year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group