Global Oil Market - Feb 13
Posted: Mon Feb 13, 2017 12:05 pm
OPEC released its monthly report, which largely confirmed the report from IEA on Friday which claimed that compliance with cuts within the cartel was above 90% in January. In fact, OPEC claimed 93% compliance from the 11 members which have agreed to take part, with Saudi Arabia actually cutting more than it agreed taking its output to 9.748 million barrels per day. The report also slightly revised higher its demand growth forecasts and claimed the oil market will see zero average surplus this year, from 985,000 barrels per day last month.
From John White at Roth Capital. He sends me an energy market report each Monday morning.
Crude Oil/Macro:
Global oil production plunged in January as OPEC and non-OPEC producers curbed supply to accelerate a market re-balancing following one of the largest oil gluts in a generation, the IEA said on Friday, 2/10/2017, as reported by Reuters. Oil supplies fell by around 1.5 million b/d last month, including 1 million b/d for OPEC, leading to record initial compliance of 90% with the agreement reached in December by large oil producers to boost prices. "Some producers, notably Saudi Arabia, are appearing to cut by more than required. This first cut is certainly one of the deepest in the history of OPEC output cut initiatives," the IEA said.
The Paris-based IEA said if the January level of compliance were maintained, the output reductions combined with strong demand growth should help ease the record inventory overhang in the next six months by around 600,000 b/d. In fact, in 4Q 2016, inventories in member countries of the OECD fell nearly 800,000 b/d, the largest drop in three years, the IEA said.
In the same release, the IEA said it had raised its estimates for global oil demand growth in 2017 by 100,000 b/d to 1.4 million b/d, citing recent improvements in industrial activity. Complicating the picture is the rising output of non-OPEC producers. After falling by 800,000 b/ d last year, the IEA estimates non-OPEC output will grow by 400,000 b/d in 2017 with combined growth from Brazil, Canada and the U.S. amounting to as much as 750,000 b/d. "Higher prices are fueling increased investments in U.S. light tight oil activity and long lead-time projects are coming on stream in Brazil and Canada," the IEA said.
Highlights from the EIA Short Term Energy Outlook, released 2/7/2017
Global petroleum and liquid fuels inventories are estimated to have increased by 800,000 b/d in 2016. EIA expects the oil market to be relatively balanced in 2017 and 2018, with inventory draws averaging 100,000 b/d in 2017 and builds averaging 200,000 b/d in 2018.
U.S. crude oil production averaged an estimated 8.9 million b/d in 2016. U.S crude oil production is forecast to average 9.0 million b/d in 2017 and 9.5 million b/d in 2018. U.S. dry natural gas production is forecast to average 73.7 Bcf per day in 2017, a 1.3 Bcf per day increase from the 2016 level. This increase reverses a 2016 production decline, which was the first decline since 2005. Natural gas production in 2018 is forecast to increase by an average of 4.1 Bcf from the 2017 level.
Increased capacity for natural gas-fired electric generation, growing domestic natural gas consumption, and new natural gas export capabilities contribute to the forecast Henry Hub natural gas spot price rising from an average of $3.43/MMBtu in 2017 to $3.70/MMBtu in 2018.
Total U.S. electricity generation from utility-scale plants averaged 11,150 gigawatt hours (GWh) per day in 2016. Forecast U.S. electric generation declines by 0.1% in 2017, and then grows by 1.5% in 2018.
The EIA expects the share of U.S. total utility-scale electricity generation from natural gas will fall from 34% last year to an average of 32% in 2017 as a result of higher expected natural gas prices. The forecast natural gas share is forecast to rise slightly to 33% in 2018. Coal's generation share rises from 30% in 2016 to average 31% in both 2017 and 2018.
Non-hydropower renewables are forecast to provide 9% of electricity generation in 2017 and 10% in 2018. The generation share of hydropower is forecast to be relatively unchanged from 2017 to 2018, and the nuclear share declines slightly in 2018.
U.S. coal production is estimated to have declined by 158 million short tons (MMst) or 18% in 2016 to 739 MMst, which would be the lowest level since 1978. The EIA expects growth in coal-fired electricity generation to contribute to a 3% increase in coal production in 2017. Coal production is expect to increase by 1% in 2018.
Coal exports in November 2016 totaled 6.6 MMst, which was 35% higher than in October and 39% higher than coal exports in November 2015. Despite the monthly and year-over-year increases, the EIA estimates that U.S. coal exports declined by 20% in 2016 to 59 MMst, the lowest level since 2009. Exports are expected to average 51 MMst in 2017 and 50 MMst in 2018.
Venezuela/China/Russia
Venezuela's state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters. The delayed shipments to such crucial political allies and trading partners, which together have extended Venezuela at least $55 billion in credit, provide further insight into PDVSA's operational difficulties and their crippling impact on the country's unraveling socialist economy. Because oil accounts for almost all of Venezuela's export revenue, PDVSA's crisis extends to a citizenry suffering through triple-digit inflation and food shortages. The total worth of the late cargoes to state-run Chinese and Russian firms is about $750 million, according to a Reuters analysis of the PDVSA documents.
At the end of January, PDVSA was late on nearly 10 million barrels of refined products that the company owes the firms, with shipments delayed by as much as 10 months, according to the documents. It also failed to make timely deliveries of another 3.2 million barrels of crude oil shipments to China's state-run China National Petroleum Corporation (CNPC-NC).
From John White at Roth Capital. He sends me an energy market report each Monday morning.
Crude Oil/Macro:
Global oil production plunged in January as OPEC and non-OPEC producers curbed supply to accelerate a market re-balancing following one of the largest oil gluts in a generation, the IEA said on Friday, 2/10/2017, as reported by Reuters. Oil supplies fell by around 1.5 million b/d last month, including 1 million b/d for OPEC, leading to record initial compliance of 90% with the agreement reached in December by large oil producers to boost prices. "Some producers, notably Saudi Arabia, are appearing to cut by more than required. This first cut is certainly one of the deepest in the history of OPEC output cut initiatives," the IEA said.
The Paris-based IEA said if the January level of compliance were maintained, the output reductions combined with strong demand growth should help ease the record inventory overhang in the next six months by around 600,000 b/d. In fact, in 4Q 2016, inventories in member countries of the OECD fell nearly 800,000 b/d, the largest drop in three years, the IEA said.
In the same release, the IEA said it had raised its estimates for global oil demand growth in 2017 by 100,000 b/d to 1.4 million b/d, citing recent improvements in industrial activity. Complicating the picture is the rising output of non-OPEC producers. After falling by 800,000 b/ d last year, the IEA estimates non-OPEC output will grow by 400,000 b/d in 2017 with combined growth from Brazil, Canada and the U.S. amounting to as much as 750,000 b/d. "Higher prices are fueling increased investments in U.S. light tight oil activity and long lead-time projects are coming on stream in Brazil and Canada," the IEA said.
Highlights from the EIA Short Term Energy Outlook, released 2/7/2017
Global petroleum and liquid fuels inventories are estimated to have increased by 800,000 b/d in 2016. EIA expects the oil market to be relatively balanced in 2017 and 2018, with inventory draws averaging 100,000 b/d in 2017 and builds averaging 200,000 b/d in 2018.
U.S. crude oil production averaged an estimated 8.9 million b/d in 2016. U.S crude oil production is forecast to average 9.0 million b/d in 2017 and 9.5 million b/d in 2018. U.S. dry natural gas production is forecast to average 73.7 Bcf per day in 2017, a 1.3 Bcf per day increase from the 2016 level. This increase reverses a 2016 production decline, which was the first decline since 2005. Natural gas production in 2018 is forecast to increase by an average of 4.1 Bcf from the 2017 level.
Increased capacity for natural gas-fired electric generation, growing domestic natural gas consumption, and new natural gas export capabilities contribute to the forecast Henry Hub natural gas spot price rising from an average of $3.43/MMBtu in 2017 to $3.70/MMBtu in 2018.
Total U.S. electricity generation from utility-scale plants averaged 11,150 gigawatt hours (GWh) per day in 2016. Forecast U.S. electric generation declines by 0.1% in 2017, and then grows by 1.5% in 2018.
The EIA expects the share of U.S. total utility-scale electricity generation from natural gas will fall from 34% last year to an average of 32% in 2017 as a result of higher expected natural gas prices. The forecast natural gas share is forecast to rise slightly to 33% in 2018. Coal's generation share rises from 30% in 2016 to average 31% in both 2017 and 2018.
Non-hydropower renewables are forecast to provide 9% of electricity generation in 2017 and 10% in 2018. The generation share of hydropower is forecast to be relatively unchanged from 2017 to 2018, and the nuclear share declines slightly in 2018.
U.S. coal production is estimated to have declined by 158 million short tons (MMst) or 18% in 2016 to 739 MMst, which would be the lowest level since 1978. The EIA expects growth in coal-fired electricity generation to contribute to a 3% increase in coal production in 2017. Coal production is expect to increase by 1% in 2018.
Coal exports in November 2016 totaled 6.6 MMst, which was 35% higher than in October and 39% higher than coal exports in November 2015. Despite the monthly and year-over-year increases, the EIA estimates that U.S. coal exports declined by 20% in 2016 to 59 MMst, the lowest level since 2009. Exports are expected to average 51 MMst in 2017 and 50 MMst in 2018.
Venezuela/China/Russia
Venezuela's state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters. The delayed shipments to such crucial political allies and trading partners, which together have extended Venezuela at least $55 billion in credit, provide further insight into PDVSA's operational difficulties and their crippling impact on the country's unraveling socialist economy. Because oil accounts for almost all of Venezuela's export revenue, PDVSA's crisis extends to a citizenry suffering through triple-digit inflation and food shortages. The total worth of the late cargoes to state-run Chinese and Russian firms is about $750 million, according to a Reuters analysis of the PDVSA documents.
At the end of January, PDVSA was late on nearly 10 million barrels of refined products that the company owes the firms, with shipments delayed by as much as 10 months, according to the documents. It also failed to make timely deliveries of another 3.2 million barrels of crude oil shipments to China's state-run China National Petroleum Corporation (CNPC-NC).