OPEC, Except For Iran, Has Peaked

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Includes: BNO, DBO, DNO, DTO, DWTI, OIL, OLEM, OLO, SCO, SZO, UCO, USL, USO, UWTI
by: Ron Patterson

The OPEC Monthly Oil Market Report is out. OPEC took a hit in December, down 205,000 barrels per day. After examining the past and present production numbers, I believe that OPEC, except Iran, has peaked. That is, the combined production from all the other OPEC nations, has peaked. And any additional production from Libya is likely to be in tiny increments that won't make much difference in the big picture. Other OPEC nations may show a slight increase from their current level. But the combined production from all the other 11 OPEC nations, 12 if you count Indonesia, has peaked.

Of course there will be some small increases from the other 11 OPEC countries from time to time but overall, in 2016 and beyond, I believe it will OPEC will be from flat to down, with a greater chance of being down. That is we are at, or near, the peak right now. There might be a slight uptick of their combined production in the coming months but not enough to get excited abut.

All data in the charts below is through December and is in thousand barrels per day.

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OPEC production, in the chart above does not include Indonesia. OPEC 12 was down 204,000 barrels per day.

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OPEC uses secondary sources such as Platts and other agencies to report their production numbers. These numbers are pretty accurate and usually have only slight revisions month to month. The biggest changes were from Iraq, Nigeria and Saudi Arabia, all down.

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Algeria peaked in November 2007 and has been in a steady decline since that point.

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Angola has been holding steady since peaking in 2008 and 2010.

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Ecuador appears to have peaked this year. It is likely production will be down, but only slightly, next year.

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Sanctions were just lifted, in the middle of January, on Iran. I expect their production to be up by about half a million barrels per day, or slightly more, by year's end. However I believe Iran will be the only OPEC nation with any significant production increase in 2016.

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Iraq increased production more than any other OPEC nation in 2015.

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I expect Kuwait will continue its slow decline from its peak in 2013.

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Libya is struggling with their own Arab Spring. There is no way of knowing when, if ever, peace will break out there. I think it extremely unlikely they will produce as much as 1,000,000 bpd within the next 5 years or so.

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Nigeria is struggling with their own political revolution. But it appears they are in decline regardless of their political problems.

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I believe Saudi is producing every barrel they possibly can. They will be lucky to hold this level for much longer.

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Qatar has lots of natural gas but their oil production has clearly peaked and is now in decline.

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From 2005 through 2010 the oil rig count in the UAE averaged around 12. In November their oil rig count stood at 48, 4 times their average. They have managed to increase their production about 11% above their 2008 peak. I believe UAE production is about to follow Kuwait's lead and rollover. The UAE's rig count dropped by 4 in December.

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Not much can be said about Venezuela. Their conventional oil is in decline but their bitumen production is keeping production relatively flat.

The below chart is in thousand barrels per day.

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This is where the OPEC action was in 2105. This chart will look entirely different in 12 months. Only Iran is likely to show any significant increase. Well, that's my opinion anyway.

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Here is what OPEC is expecting Non-OPEC countries to produce in 2016. They are expecting total Non-OPEC total liquids production to decline by 670,000 barrels per day. I expect the C+C decline will be closer to one million barrels per day. And I think it is likely that the total liquids decline will be close to that mark also.

Notice that they are predicting US total liquids to drop by only 380,000 barrels per day in 2016. I think this is overly optimistic. I am predicting a Non-OPEC production decline of at least one million barrels per day.

Indonesia, though they are a net importer and in decline, became an OPEC member this month. They have no "crude only" history so I will have to take their EIA chart and subtract their estimated percentage of condensate production and go from there.

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Here the EIA data is through June, the JODI data is through October and the OPEC MOMR data is through December. Again, the MOMR data does not include condensate while the JODI and EIA data does. It looks like condensate is about 12 percent of Indonesia's production.

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And I just had to add this for those who think there is little chance of OPEC peaking. OPEC less Saudi and Iraq peaked in 2008 and is down over 2,800,000 barrels per day since that point.

Just in: The Highlights of the IEA's Oil Marker Report came out Tuesday. Normally the highlights gives the IEA's estimate on Non-OPEC oil production. However this month they failed to do so. But all is not lost, Canada's Financial Post was kind enough to give us the IEA's estimate of December Non-OPEC production. Bold mine.

As OPEC pursues its policy of gaining market share and driving down prices, most non-OPEC producers have curtailed spending to weather the prolonged downturn. Non-OPEC production in December declined sharply by nearly 650,000 bpd to 57.4 million bpd- its lowest level since September 2012, according to an International Energy Agency report published Tuesday.

That is alarming. Perhaps my estimate of Non-OPEC production decrease of one million barrels per day is too low. "its lowest level since September 2012" is obviously a typo. What they meant was "its largest single month decline since September of 2102".