Global Oil Glut To Build Through 2018, EIA Says

Robert Boslego - Contributor - Energies

The Energy Information Administration (EIA) published its Short-Term Energy Outlook (STEO) for January, and for the first time provided its projections for 2018. After all of the hype about the OPEC production cut, it may come as a surprise that the EIA is projecting a rise in global oil inventories in 2017 and 2018.

Specifically, the EIA had estimated that OECD oil stocks ended at 3.101 billion barrels at the end of 2016. It's forecasting them to rise further to 3.127 and 3.158 billion at the end of 2017 and 2018, respectively. The 5-year ending average as of December 2014, before the glut started, was 2.666 billion. Continue reading "Global Oil Glut To Build Through 2018, EIA Says"

U.S. Crude Oil Production Did Not Increase 170,000 B/D Last Week

Robert Boslego - Contributor - Energies

Contrary to popular belief, although the Energy Information Administration (EIA) reported that U.S. crude inventories rose 170,000 b/d last week, that almost certainly did not happen. The EIA’s weekly production number comes from its production model, which is highly flawed. Its monthly numbers come from a survey, which is a much more reliable source of data.

Not including production data from the early 1970s, crude production in the U.S. peaked in April 2015 at 9.6 million barrels per day (mmbd). Crude production appears to have bottomed in July 2016 at 8.6 mmbd, making the peak-to-trough 900,000 b/d.

In August, the EIA reported that crude production increased by 51,000 b/d as the result of increased production in the Gulf of Mexico. But EIA’s forecast in its Short-Term Energy Outlook (STEO) published in July for August turned out to be 524,000 b/d lower than the actual monthly figure, a huge forecasting error. Continue reading "U.S. Crude Oil Production Did Not Increase 170,000 B/D Last Week"

How Saudi Arabia Will Manage the Oil Market in 2017

Robert Boslego - Contributor - Energies

OPEC agreed in Algeria to limit future oil production. This represents a major shift in the policy announced in November 2014 to compete for market share through lower prices.

The OPEC communique stated the group will retain output to a "target range of 32.5 to 33.0 million barrels per day" (mmbd). In the latest OPEC Monthly Oil Market Report (MOMR), OPEC reported that production average 33.4 mmbd in September. While that is not far above the target range, there are other problems looming on the horizon; several countries—Nigeria, Iran, Iraq, and Libya—all want to restore their output to levels they were at before their supplies were disrupted, and that could push OPEC’s output up to nearly 35 mmbd if they succeed.

Saudi Energy Minister Khalid Al-Falih reversed KSA’s position from last April when it would not freeze output without Iran’s agreement to do the same. Instead, he said, Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense as part of any output limits which could be set as early as the next OPEC meeting in November."

My interpretation is that Saudi Arabia and the smaller Gulf producers are therefore going to have to absorb the cuts if they intend to achieve the target. Continue reading "How Saudi Arabia Will Manage the Oil Market in 2017"

World Oil Supply-Demand Balance in 2017 Depends on Limited OPEC Production Increase

Robert Boslego - Contributor - Energies

The Energy Information Administration (EIA) recently released its September Short-Term Energy Outlook (STEO) and its projects that world supply and demand will finally balance by late 2017. However, that depends on OPEC production rising a very small amount.

Base Case Scenario

Specifically, the EIA reported that OPEC crude production averaged 32.7 million barrels per day (mmbd) in August, and it projects OPEC production to average 32.95 mmbd in 2017. Under that scenario, world supply meets demand of 97.8 million barrels per day, and total inventories end 2017 at 3.062 billion barrels, about 350 million barrels higher than normal.

OECD Commercial Oil Inventory

The 2017 demand figure represents a gain of 1.5% from estimated demand in 2016 of 95.88 mmbd, which is a gain of 1.6% over 2015. This assumes a healthy macroeconomic environment. For example, the EIA is projecting that US GDP gains 2.6% in 2017, much better than the 1.5% GDP gain EIA assumes in 2016. Continue reading "World Oil Supply-Demand Balance in 2017 Depends on Limited OPEC Production Increase"

How The Natural Gas Storage Glut Has Been Cut This Summer

Robert Boslego - Contributor - Energies

The National Oceanic and Atmospheric Administration (NOAA) reports cooling degree day (CDD) data for every seven-day period by state. From that data, they construct a populated-weighted national total.

CDDs are the difference between the daily temperature mean (high temperature plus low temperature divided by two) and 65°F. If the temperature mean is above 65°F, we subtract 65 from the mean.

Example: The high temperature for a particular day was 90°F and the low temperature was 66°F. The temperature mean for that day was: Continue reading "How The Natural Gas Storage Glut Has Been Cut This Summer"