Four months have passed since the last update in May 2018, and it is time to take a fresh look at the global oil market, especially in light of the unique OPEC+Russia+others deal coming to an effective end in July. This led to a predictable fall in the oil price, Brent losing >$6/bbl on the news, but it has since recovered to >$77/bbl and looks like it could head north of $80 in the coming weeks. What is going on in the oil markets? Global total liquids production hit a record-high of 99.00 million barrels per day in July 2018 while the wheels once again appear to be coming off the wagon in Libya.
Under-reported in the main stream news (MSN) is the fact that unrest seems to have spilled over once more in Libya knocking production back from 970,000 bpd in May to 670,000 bpd in July (inset image up top, Figure 17 below). The FT reported this on July 2:
Libya's national oil company has suspended crude loadings at two major oil terminals, which together with a separate port blockade is estimated to trigger a drop in production of 850,000 barrels a day just as global outages have tightened the market and fueled prices.
The dramatic fall in the country's output, equivalent to almost 80 per cent of its production, comes as Brent has again been rising towards $80 a barrel. This spurred US president Donald Trump to call on Saudi Arabia to release 2m b/d of extra oil on to the market to offset a drop in Venezuela's output and an expected fall in Iranian barrels.
(FT: Political upheaval in Libya threatens oil production. Tip: Google this title to gain access.)
The drop so far is less than anticipated by the FT - but perhaps, there is more to come? While the MSN is alert to the political, economic and oil production woes in Venezuela, they seem less aware of the production woes elsewhere in OPEC weak countries that saw production fall well below the agreed targets. Comparing July with May production provides a clear picture of OPEC strengths and weaknesses:
Country July - May = difference
Saudi Arabia 10.35 - 10.03 = +320,000
Iraq 4.56 - 4.47 = +90,000
Iran 3.75 - 3.82 = -70,000
UAE 2.98 - 2.87 = +110,000
Kuwait 2.80 - 2.71 = +90,000
Ecuador 0.53 - 0.53 = 0
OPEC strong total = +540,000
Venezuela 1.26 - 1.36 = -100,000
Angola 1.47 - 1.51 = -40,000
Nigeria 1.52 - 1.47 = +50,000
Algeria 1.06 - 1.04 = +20,000
Qatar 0.62 - 0.61 = +10,000
OPEC weak total = -60,000
Russia 11.6 - 11.35 = +250,000
Other FSU 3.08 - 3.11 = -30,000
USA 15.13 - 15.03 = +100,000
Canada 4.88 - 5.06 = -180,000
Mexico 2.09 - 2.11 = -20,000
Others total = +120,000
The total for OPEC + Russia + others ~ 700,000, still short of the extra 1 Mbpd that was promised. Only time will tell if the OPEC strong are able to pull barrels out of the hat. And, there are darker clouds for oil supplies on the horizon with sanctions on Iran expected to bite in the 4/4. Analysts expect a fall in Iranian crude exports of between 0.5 and 1.0 Mbpd. Oil prices may be heading sharply higher by Christmas.
Biofuel production follows an annual cycle with peaks in ~ September and troughs ~ March. Production is now close to the seasonal high and falling biofuel production from now to March will reinforce upwards pressure on oil price.
The following totals compare July 2017 with July 2018:
World Total Liquids 98.31/99.00 +690,000 bpd
OPEC 12: 32.55/31.57 -980,000 bpd
Russia + FSU 14.36/14.68 +320,000 bpd
Europe OECD 3.48/3.38 -100,000 bpd
Asia 7.36/7.16 -200,000
North America 20.24/22.10 +1,860,000 bpd
Year on year, the big winners are North America and Russia + FSU. The big loser is OPEC where the OPEC weak now undermines the ability of the cartel to control global oil supply.
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 and is maintained by Neil Mearns.
Oil price data updated to 20 August 2018 using data from the EIA.
Figure 1 Daily oil prices from the EIA updated to 20 August. Brent has since strengthened to ~ $77.50. With most withheld supply back on the market and Iranian sanctions looming, the oil price may head sharply higher by Christmas.
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.
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 24 August for N America and to July 2018 for all the rest.
Figure 4 Stacked area chart showing North America total rig count. Peak drilling was reached on 27 January 2012 with a total of 2789 active rigs. The post oil price crash low was reached on 27 May 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 1044 on 24 August. The trend is creeping upwards.
Figure 6 Same data as above but plotted as an unstacked line chart.
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.
Figure 8 Drilling has slumped in the North Sea to a record low since 1995. 28 rigs were active in July 2018 compared with a pre-crash high of 58 rigs in April 2014. There is still no sign of the North Sea coming back to life.
Figure 9 Drilling within OPEC remains close to a cyclical high but is also falling slowly led down by Venezuela. Drilling in the remaining OPEC countries has been stable at ~ 300 rigs since August 2015. An uptick in OPEC drilling will be the first sign of concern that current production levels are being challenged by declines. 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 S 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 S America, including OPEC members Venezuela and Ecuador, remains in the doldrums, with 162 rigs operational in July 2018. Note how drilling in Brazil and Colombia collapsed completely but Colombia is now coming back to life.
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 to 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. OECD production has pushed higher during the last 12 months, led by the USA, and now stands on 25.84 Mbpd.
Figure 12 The shape of the N American stack is dominated by the USA where LTO production began to accelerate early in 2012. The mid-term peak for N America was in April 2015 at 20.12 Mbpd. That peak has been busted by the recent surge in US production. In July 2018, total production was 22.11 Mbpd down a little on the previous month.
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 is 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 N Sea production that began in 2014 (the year of the crash) now seems to be faltering. July 2018 production stood at 3.38 M bpd. UK production is stable, but Norway appears to be experiencing some steeper decline.
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, focusing instead on quota compliance. The reference month for OPEC quotas was October 2016 when production hit a record high of 32.92 Mbpd. In July 2018, OPEC 12 production stood at 31.57 Mbpd, still down 1,350,000 bpd from the October 2016 datum despite efforts to restore production to normality. 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 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 3.81 Mbpd in January and has hit a production plateau following the lifting of sanctions. The re-imposition of sanctions in the 4/4 is expected to cut between 0.5 and 1.0 Mbpd from Iranian production/exports.
Figure 17 Libya achieved 1.1 Mbpd in July, 0.92 Mbpd in September and pumped 1.00 Mbpd in January 2018. Renewed political and social instability has sent Libyan production back down to 0.67 Mbpd in July 2018.
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 (The OPEC+Russia reference month). Russia remained largely compliant with "the deal" and cut ~250,000 bpd from the reference month high for its duration. In July 2018, Russian production stood at 11.6 Mbpd, identical to the October 2016 reference month.
In October 2016, FSU production stood at 2.91 Mbpd. In July 2018, it stood at 3.08 Mbpd, a rise of 170,000 bpd.
Figure 20 Production in SE Asia remains in slow decline.
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. In October 2016, Omani production stood at 1.02 Mbpd. In July 2018, 0.98 Mbpd, down 40,000 bpd on October 16. Oman has not restored production cuts.
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. Note that Gabon and Equatorial Guinea have recently joined OPEC. A sharp drop in the "other" group in May 2018 may reflect trouble somewhere.
Figure 24 Summary of global C+C+NGL production. Note that OPEC countries' NGL production is reported separately. July 2018 totaled 93.85 Mbpd. The record C+C+NGL production remains 94.18 Mbpd set in November 2016 when OPEC++ were 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. July 2018 production stood at 99.00 Mbpd setting an all-time high! The previous high of 98.84 Mbpd recorded in November 2016 has been exceeded by 160,000 bpd.