Oil Production Vital Statistics June 2017

by: Euan Mearns

Owing to the General Election, I missed Vital Statistics in May, and since the last edition 2 months ago, there has been quite a lot of action. In June, the oil price succumbed to gravity and fell to $45 / bbl (Brent) but has since recovered to $50. OPEC 10 (excluding Libya, Nigeria and Gabon) produced 29.64 Mbpd in May, down 1.34 Mbpd on October 2016, and remains compliant with the agreed cuts. But adding in Nigeria and Libya, where production is rising, the cut is reduced to 1.04 Mbpd. Russia has cut 280,000 bpd and is largely compliant, but this merely undoes a sharp production ramp leading into the Ocober datum month. The real damage to the oil price comes from the USA, where production is rising once again. Production in the USA is up 670,000 bpd on October 2016, undoing much of the OPEC constraint.

OPEC have agreed to extend their cuts until March 2018. I have said all along that the magnitude of the cut is insufficient to support price when confronted with large oversupply and large inventories in storage. Large OECD projects continue to mature and come on-line; for example, the Kraken Field in the UK North Sea has just come on and will produce 50,000 bpd. The oil price will only begin to make a genuine and sustained recovery when non-OPEC supply begins to fall in response to low price. And that may not happen until late 2019.

OPEC drilling remains close to a cyclical high (Figure 9), while US drilling continues to recover. Total US rigs stood at 940 on 30th June, up 32 for the month, though there are signs the rig count growth is slowing. Drilling remains stuck in a cyclical low everywhere else.

Canadian production traditionally hits a seasonal low in June, and this year is no exception, with production down 700,000 bpd since February. Recovery from this seasonal low will will produce further headwinds for oil price for the remainder of this year.

The following totals compare May 2016 with May 2017:

  • World Total Liquids: 95.34/96.69 +1,350,000 bpd
  • OPEC 12: 31.82/31.88 +60,000 bpd
  • Russia: + FSU 13.95/14.31 +60,000 bpd
  • Europe: OECD 3.41/3.48 +70,000 bpd
  • Asia: 7.50/7.41 -90,000
  • North America: 18.60/19.62 +1,020,000 bpd

With global total liquids production up 1.35 Mbpd on a year ago despite OPEC+Russia cuts, it is little surprise that the oil price is significantly depressed. One reason for the large YOY increase was the Fort McMurray wildfire last year that shut down a large part of Canadian oil sands production.

The following totals compare October 2016 with March 2017 and monitor compliance with the OPEC + others' production cuts.

  • OPEC 10: 30.98/29.64 - 1,340,000 bpd
  • Russia + FSU: 14.51/14.31/ -200,000 bpd
  • Oman: 1.02/0.98 -40,000 bpd
  • Total: -1.58 Mbpd - compliance has slipped a little

Note that Vital Statistics is produced using the Global Energy Graphed database employing Google Sheets. Since these graphs are live, they will update automatically in future as more data are added, meaning that the narrative of this post will no longer match the data in the months ahead. Also note that Google has changed the formatting of the charts, which are no longer as functional as they once were.

Oil Price

Oil price data updated to 21 April 2017 using data from the EIA.

Figure 1 Daily oil prices from the EIA updated to 26th June. In the last issue of Vital Statistics, I wrote, "A significant drop below $50 (Brent) would be bearish". The oil price recovery has clearly fizzled out, and if support at ~$40 does not hold, then we may see the January 2016 lows of ~$26 tested.

Figure 2 Longer-term view of daily oil price. Note how the Brent-WTI spread was a feature of the high oil price era.

Figure 3 WTI minus Brent. At its peak, the spread reached $30 per barrel. It has now virtually disappeared. (I don't know why the Y-axis labels have disappeared on this chart.)

Rig Counts

Rig count charts for North America, the USA, South America, the North Sea and OPEC are shown below. Additional charts for Europe, the Middle East, Africa and Asia-Oceania can be found here.

Rig counts provided by Baker Hughes are updated to 28th April for North America and to March 2017 for all the rest.

Figure 4 Stacked area chart showing North America total rig count. Peak drilling was reached on January 27, 2012, with a total of 2789 active rigs. The post-oil price crash low was reached on May 27, 2016, when only 469 rigs remained active. Canadian drilling is making a premature seasonal recovery. Mexico remains in the doldrums with 23 operational rigs. Only the USA, and mainly the shale sector, has come back to life.

Figure 5 Stacked area chart of US Total rig count showing the oil-gas split updated to June 30. The total US rig count stands at 940, up 32 for the month.

Figure 6 Same data as above, but plotted as unstacked line chart. The slowdown in growth is clearly visible, especially for gas-orientated rigs.

Figure 7 US rig count broken out by sedimentary basin / petroleum systems play. The recent revival in US drilling has been led by the Permian, which is a prolific and low-cost LTO play. Notably, a total rig count of 940 has proven sufficient to reverse decling US oil production and maintain gas production + LNG exports.

Figure 8 Drilling has slumped in the North Sea to a record low since 1995. 32 rigs were active in May, compared with a pre-crash high of 58 rigs in April 2014.

Figure 9 Drilling within OPEC remains close to a cyclical high. Note that the data series for Iraq and Iran are incomplete and affected by war and sanctions and are not shown.

Figure 10 The near-term top in South American rigs was 329 in August 2014. By June 2016, this had crashed to 158, and it remained at about that level for the remainder of the year. Drilling in South America, including OPEC members Venezuela and Ecuador, remains in the doldrums, with 167 rigs operational in May 2017.

Oil Production

Monthly oil production data are compiled from the IEA OMR. The public data are normally released towards the end of the month and relate to the previous month, meaning that we are always running 4-5 weeks behind real time. The oil production graphs are updated to May 2017.

The 15 graphs below are mainly composite production groups. Graphs for individual countries reproducing the whole of the IEA OMR oil production data can be found as follows:

OPEC - 16 charts
OECD - 10 charts
Rest of World (including Russia) - 21 charts

Figure 11 The OECD has only 4 significant oil producers: the USA, Canada, Mexico and Norway. The UK has now become a small player with production ~1 Mbpd, alongside small producers Denmark and Australia. Since the 2014 oil price crash, OECD production has effectively been stable at just below 24 Mbpd.

Figure 12 The shape of the North American stack is dominated by the USA, where LTO production began to accelerate early in 2012. The near-term peak for North America was in April 2015 at 20.12 Mbpd. In May 2017, total production was 19.62 Mbpd.

Figure 13 European oil production is dominated by the North Sea and, in particular, by Norway. The "other" category is dominated by Denmark, with a contribution from Italy. The high on this chart is 7.1 Mbpd in April 2002, while the low is 2.94 Mbpd in September 2013. The North Sea continues with its tentative recovery based on momentum built during the pre-2104 high oil price era.

Figure 14 Stacked chart for monthly oil production of 12 OPEC countries. Gabon, which rejoined OPEC in July 2016, is not shown. The grey band at the top shows spare capacity. The IEA has not reported spare capacity since December 2016, focussing instead on quota compliance. The reference month for OPEC quotas was October 2016, when production hit a record high of 32.92 Mbpd. This had fallen back to 31.88 Mbpd in May 2017, a reduction of 1.04 Mbpd that includes rising production in Nigeria and Libya.

Figure 15 Details of OPEC spare capacity. At the end of 2016, spare capacity was approaching historic lows of 1.99 Mbpd, with most countries pumping flat out. The IEA has not published spare capacity data since December 16.

Figure 16 Iran pumped 3.78 Mbpd in May and is likely producing at close to capacity.

Figure 17 The promised revival of Libyan production to 1 Mbpd has resumed pace, with 0.74 Mbpd produced in May 2017.

Figure 18 Rest of World production has been glued to a plateau of 30 Mbpd since January 2010. However, this statistic hides winners and losers. Russia is the most prominent winner and China the most prominent loser.

Figure 19 Production in Russia and FSU ticked up in October to 14.51 Mbpd, the reference month for the OPEC + Russia deal. In May, production stood at 14.31 Mbpd, down 200,000 bpd, short of the 300,000+ bpd promised constraint. Russia has cut 280,000 bpd, while the rest of the FSU has raised production by 80,000 bpd relative to October. There is no doubt room for some argument there.

Figure 20 Production in Southeast Asia remains in slow decline, led by China.

Figure 21 South America, excluding OPEC countries Venezuela and Ecuador, is dominated by Brazil. Production for the group is stable. I do not know the reason for the steep fall in Brazil's production that took place in June 2010.

Figure 22 The Middle East excluding OPEC is dominated by Oman. Other Middle East will be dominated by Bahrain. The group decline reflects wars in Syria and Yemen. Oman is party to the OPEC deal, and production there is down 40,000 bpd since the October 2016 high, a slippage of 10,000 bpd from their commitment.

Figure 23 Africa excluding OPEC (Libya, Algeria, Nigeria and Angola) has only one other major producer in the shape of Egypt. There are a host of smaller producers in the other category that includes countries like Equatorial Guinea, Republic of Congo, Gabon, South Sudan, Chad and Tunisia. The group is in slow decline.

Figure 24 Summary of global C+C+NGL production. Note that OPEC countries' NGL production is reported separately.

Figure 25 Global total liquids showing the constituent parts. Chart not zero-scaled.