Oil Production Vital Statistics February 2018
Last month, I wrote this on the price of oil:
A correction is now overdue and I suspect we see $65 before a significant move above $70. The only bearish signal is US+Canada production growth.
The Brent front-month corrected to ~$63 and now stands on $64.37. Art Berman has an interesting article, "Oil Price Crossroad," recognising that we are now in the territory of market indecision. The IEA OMR is confusing, saying both "rebounding US production underpinned non-OPEC output growth" and "Non-OPEC output dropped by 175 kb/d in January" (I think the former is YoY and the latter MoM). Below the fold, I simply try to look at the bare facts.
The chart below from the February OMR is one of the more important produced by the IEA showing the balance between supply and demand leading to either stock draw or additions.
My version of the IEA chart taken from my 2018 oil price scenario is shown below and is based on their data. It is rather difficult to reconcile the historic data on their chart with mine.
The February IEA OMR says this:
It is clear that strong demand growth in 2017, alongside a modest increase last year in non-OPEC output, and the cuts made by leading producers, has contributed to the extraordinarily rapid fall in OECD oil stocks. A year ago, they were 264 mb above the five-year average and now they are only 52 mb in excess of it, with stocks of oil products actually below the benchmark. Although the OECD is not the whole world, the leading oil producers who agreed to cut output identified the level of the group's stocks as an indicator of the progress of their initiative. With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand. This, however, is not necessarily the case: oil price rises have come to a halt and gone into reverse, and, according to our supply/demand balance, so might the decline in oil stocks, at least in the early part of this year.
I have been following biofuel production, pointing out that it had been on a cyclical high last autumn and was scheduled to fall by ~1 Mbpd over the winter. A fall of 810,000bpd has now duly happened. Falling biofuel production will now cease to support the oil price, and the coming rise may have the opposite effect.
The following totals compare January 2017 with January 2018:
- World Total Liquids 96.32/97.54 +1,220,000 bpd
- OPEC 12 31.70/31.82 +120,000 bpd
- Russia + FSU 14.43/14.46 +30,000 bpd
- Europe OECD 3.62/3.40 -220,000 bpd
- Asia 7.50/7.20 -300,000
- North America 19.52/21.05 +1,530,000 bpd
In summary, variance within OPEC+Russia is effectively "noise", both groups pegged to production agreements. Production decline in Asia and Europe is offset by production growth in North America. The USA and Canada are the only countries displaying strong production growth.
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. The database was compiled by Neil Mearns, who also updated all the charts this month.
Oil Price
Oil price data updated to February 26, 2018, using data from the EIA.
Figure 1 Daily oil prices from the EIA updated to February 26. On around June 28th, 2017, the WTI-Brent spread began to open but is now showing signs of closing again (Figure 3). The anticipated correction occurred, and I suspect perhaps some sideways, range-bound movement until the signals from production growth in North America and global demand growth become more clearly defined.
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. During the price collapse, the spread disappeared completely but then re-opened. There are possible signs of it beginning to close once more, although the most recent value on February 26 was -$4.15.
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 March 2nd for North America and to January 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. The meso-scale structure of this chart is dominated by seasonal cycles in Canada, while the macro-scale swings are dominated by the USA. Rig count in the USA is creeping up, not shooting up. The recent rise in US production does not correlate with drilling since April 2017. This has been attributed to improved drilling efficiency. An ongoing compounding factor is the status of drilled but undeveloped wells. Mexico continues to slumber.
Figure 5 Stacked area chart of US Total rig count showing the oil-gas split. The total US rig count stood at 978 on March 2nd, up 20 from the near-term high of 958 recorded on July 28, 2017.
Figure 6 Same data as above, but plotted as an unstacked line chart. The return of drillers to the LTO patch in the USA has not yet taken off.
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 where Exxon Mobil (XOM) has announced large future investment on property acquired from Bas Energy.
Figure 8 Drilling has slumped in the North Sea to a record low since 1995. 25 rigs were active in January 2018, down in December compared with a pre-crash high of 58 rigs in April 2014. There is no sign of the North Sea coming back to life; however, BP recently announced two new discoveries.
Figure 9 Drilling within OPEC remains close to a cyclical high, but is also falling slowly as production cuts reduce the need for new wells. 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 173 rigs operational in January 2018. Note how drilling in Brazil and Colombia collapsed completely, but Colombia is now coming back to life. A decline in drilling in Venezuela is holding the South American total back, where otherwise there are tentative signs of activity returning.
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 January 2018.
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 GlobalEnergyGraphed 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. Although strong recent growth in North America pushed group production up to 24.92 Mbpd in December 2017, it has fallen back 60,000 bpd to 24.86 Mbpd in January 2018.
Figure 12 The shape of the North American stack is dominated by USA, where LTO production began to accelerate early in 2012. The near-term peak for North America was at 20.12 Mbpd in April 2015. That peak has been busted by the recent surge in US production. In January 2108, total production was 21.05 Mbpd, down a little on the previous month.
IEA revisions have totally transformed the picture since the December report, which showed US production to be flat as of November 2017. This may impact my oil price scenario for 2018.
The notch down in Canada in May 2016 was down to the Fort McMurray wildfire. Mexican production continues its long-term decline (below).
Offshore Mexican production that is dependent upon nitrogen injection appears to be on the skids.
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, the low is 2.94 Mbpd in September 2013. The recovery in North Sea production that began in 2014 (the year of the crash) now seems to be faltering. January 2018 production stood at 3.40 M bpd. UK production is stable, but Norway appears to be experiencing some steep decline. I wonder if Norway is holding back some production showing solidarity with OPEC++.
Figure 14 Stacked chart for monthly oil production of 12 OPEC countries. Gabon, which rejoined OPEC in July 2016, and Equatorial Guinea, which joined in 2017, are not shown. The grey band at 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. In January 2018, OPEC 12 production stood at 31.82 Mbpd, down 1,100,000 bpd from the October datum. Libya, Nigeria and Iran are not party to the production constraint deal.
Figure 15 Details of OPEC spare capacity. At the end of 2016, spare capacity was approaching historical 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 3.81 Mbpd in January and has hit a production plateau following the lifting of sanctions.
Figure 17 Libya achieved 1.1 Mbpd in July, 0.92 Mbpd in September and pumped 1.00 Mbpd in January 2018. Stability may have returned to the part of Libya where production has been restored.
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 In October 2016, Russian production stood at 11.6 Mbpd. In January 2018, production stood at 11.33 Mbpd, a fall of 270,000 bpd. Russia remains compliant with the agreed cut of 250,000 bpd in this historic deal. Note that between August 2016 and October 2016, Russia ramped up production by 550,000 bpd (the OPEC++ datum).
Figure 20 Production in South East 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 of 980,000 bpd in December 2017 is down 40,000 bpd since the October 2016 datum, which is below the target 50,000 bpd cut.
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 include countries like Equatorial Guinea, Republic of Congo, Gabon, South Sudan, Chad and Tunisia. The group is in slow decline. Note that Gabon and Equatorial Guinea have recently joined OPEC.
Figure 24 Summary of global C+C+NGL production. Note that OPEC countries' NGL production is reported separately. January 2018 totalled 93.17 Mbpd. The record C+C+NGL production remains 94.18 Mbpd set in November 2016, when OPEC++ was pumping flat out ahead of "The Deal".
Figure 25 Global total liquids showing the constituent parts. Processing gains and biofuels are not shown in Figure 24. Chart not zero-scaled. January 2018 production stood at 97.54 Mbpd, down 1.30 Mbpd from the all-time high of 98.84 Mbpd recorded in November 2016.
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