At various points over the past year, hopes have risen that production cuts by OPEC would succeed in draining the world’s oil inventories enough to bring prices into the $55-per-barrel range needed for U.S. producers to really get moving again.Those hopes have been dashed consistently, with prices lingering below $50, and now economists at the Dallas Federal Reserve say that the supply glut is likely to continue far into next year. That’s bad news for Houston’s oil-bound economy, which may not see the strong recovery that some have anticipated.The culprits in all this are U.S. shale drillers. Over the past year or so, they have more than doubled the rig count, bringing so much supply online that the market has yet to tighten enough to force prices up – even as the OPEC-led coalition of oil producers extends output cuts of 1.8 million barrels per day into next year. (Robust oil shipments from Libya and Nigeria aren’t helping, either.)
Source: Higher demand is needed to end oil glut – but will it come? – Houston Chronicle
U.S. shale oil production is expected to rise in March by 80,000 barrels per day to 4.87 million bpd, data from the U.S. Energy Information Administration showed on Monday.Eagle Ford production is set to rise 14,000 bpd to 1.08 million bpd, while Permian production will rise by 70,000 bpd to 2.3 million bpd, the EIA said in its drilling productivity report.In the Bakken, production is forecasted to fall by 18,000 bpd to 976,000 bpd.
Source: U.S. shale oil output set to rise in March by 80,000 bpd: EIA | Reuters
Nigerian President Muhammadu Buhari is eyeing an increase to his country’s oil production to 2.2 million bpd, the volume it had pumped before militant attacks in the Niger Delta started crippling the country’s output and exports in early 2016.Presenting next year’s budget in Parliament, Buhari said he was willing to restore the 2.2-million-bpd production level—a statement that is probably cringeworthy for OPEC, who is hard-selling the cuts to the volatile markets, and who had exempted Nigeria from the collective cuts deal to curb its output to 32.5 million bpd, effective in January.“We must all come together” to see peace in the Niger Delta, Reuters quoted President Buhari as saying in Parliament.At the beginning of 2016, Nigeria’s oil production was some 2.1 million bpd, but scores of militant attacks on oil infrastructure in the delta has dragged down production, which was around 1.5 million bpd in August.
Source: Post OPEC Deal: Nigeria Plans To Increase Oil Output By 500,000 Bpd | OilPrice.com
Is the oil exploration & production spending supply hole real and will it result in a production gap in a couple of years?
The oil industry and its analysts have begun to focus on how capital spending has declined so much recently that we could find that we do not have enough oil within a couple of years to meet demand. This “supply hole thesis” has been used by Saudi to justify a production cut in order to signal producers to allocate more money into the sector and it has been what has been used by stuggling producers to hang on in the hope that the supply hole will drive prices back up to get them back to financial health.
Article by Amy Myers Jaffe (@AmyJaffeenergy) is executive director of energy and sustainability at the University of California, Davis, Graduate School of Management : Why a Coming Gap in the Supply of Oil Is Unlikely
Oil prices fell on Tuesday after Venezuela said that global supplies needed to fall by 10 percent in order to bring production down to consumption levels, and technical indicators also pointed to cheaper crude futures. Global oil supply of 94 million barrels per day needs to fall by about a tenth if it is to match consumption, Venezuela’s Oil Minister Eulogio Del Pino said on Monday.International benchmark Brent crude oil futures (LCOc1) were trading at $45.81 per barrel at 0139 GMT (09:39 p.m. EDT), down 17 cents from their last close.U.S. West Texas Intermediate (WTI) crude futures (CLc1) were down 22 cents at $43.08 a barrel.”Global production is at 94 million barrels per day, of which we need to go down 9 million barrels per day to sustain the level of consumption,” Del Pino said in an interview with state oil company PDVSA’s internal TV station.Del Pino is also president of PDVSA.The statements came the same day as credit ratings agency Standard & Poor’s said that a proposed bond swap by PDVSA was a “distressed exchange” that would be “tantamount to default” if completed, a blow to the cash-strapped firm’s effort to seek a financial lifeline.Technical market indicators were also weak, with WTI likely to test support at $42.78 per barrel soon, after which a fall toward $42 would be likely, according to Reuters analyst Wang Tao.
Source: Oil slips as Venezuela says market is 10 percent oversupplied By Reuters
The surplus in global oil markets will last for longer than previously thought, persisting into late 2017 as demand growth slumps and supply proves resilient, the International Energy Agency said.
World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, it said. Just last month the agency predicted the market would return to equilibrium this year.
Source: IEA Changes View on Oil Glut, Sees Surplus Enduring in 2017 – Bloomberg
Saudi Arabia has retaken the position of the world’s top oil producer from the U.S., according to the International Energy Agency.
“Saudi Arabia’s elevated oil production has allowed it to overtake the U.S. and become the world’s largest oil producer,” the Paris-based IEA said in its monthly report on Tuesday.
While Saudi Arabia added 400,000 barrels a day of output from low-cost fields since May, about 460,000 barrels a day of “high-cost” production was shut down in the U.S. America has been the world’s largest producer of crude and other liquid hydrocarbons since April 2014 following the shale oil boom.
U.S. output in August stood at 12.2 million barrels a day, including natural gas liquids, according to the IEA. That compared with Saudi Arabian production of 12.58 million barrels a day the same month.
The drop in U.S. production came as the number of rigs drilling for oil and gas fell to a record low of 404 on May 20, according to data from Baker Hughes Inc. That number has since recovered to 508 as of Sept. 9.
Saudi Arabian crude supply climbed to 10.65 million barrels a day in July, before easing to 10.6 million in August. Production has averaged 10.36 million barrels a day in the first eight months of this year, almost 200,000 barrels a day higher than the year-earlier period.
Source: Saudi Arabia Ousts U.S. as Biggest Oil Producer, IEA Says
Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month.That’s a concern for the industry at a time when the U.S. Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the U.S. shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there.New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultants Rystad Energy AS. “There will definitely be a strong impact on oil and gas supply, and especially oil.”Global inventories have been buoyed by full-throttle output from Russia and OPEC, which have flooded the world with oil despite depressed prices as they defend market share. But years of under-investment will be felt as soon as 2025, Bjurstroem said. Producers will replace little more than one in 20 of the barrels consumed this year, he said.
Source: Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead – Bloomberg
Saudi Arabia is sending signals that it could boost its crude oil supplies in August to a new record level, overtaking Russia, the world’s top oil producer, as it gets ready for tough talks next month for a global output freeze pact.Industry sources say the kingdom, already the world’s largest oil exporter, started to raise production from June, after holding it steady for the first half of the year, to meet rising seasonal domestic demand as well as higher exports requirements.Higher production could give it more leverage during talks in September when both OPEC and non-OPEC producers are expected to revive a freeze deal to support oil prices, the sources say.In June, Saudi Arabia pumped 10.55 million barrels of oil per day, and lifted production to 10.67 million bpd in July, the highest in its history.Now the sources expect the OPEC heavyweight to raise its crude supplies to a further record this month as demand inside and outside the kingdom looks healthy.One source from outside OPEC said the Saudis were quietly telling the market output could rise further in August to as high as 10.8-10.9 million bpd.
Source: Saudi signals it may hit new oil output record ahead of freeze talks, sources say
July was the worst month for crude oil in a year. The usual seasonal boost in demand that could be helping prices is lackluster right now, Barclays’ Michael Cohen and his team wrote in a note on Monday. This postpones any chances for the market to balance out, he said.Summer is usually the best season of the year for excess inventories in both crude and refined products like gasoline to drop. After a few busy months of road trips, the oil market enters a so-called shoulder season, and refineries wind down to prepare for higher heating-oil demand.US stockpiles are at the highest level for this time of year in at least two decades, according to Bloomberg. And inventories could build up even more during this period.
Source: Oil demand growth remains lackluster – Business Insider