15th December 2017
Oil Drilling Activity
Onshore drilling activity remained flat, bringing to a halt a five-week upward trend, at 909. Across the three major unconventional oil basins, the oil rig total decreased by 2. US rigs targeting oil dropped by 4, with the total standing at 747. US operators continue to show patience as crude prices continue to hold below US$60 (WTI) per barrel.
Natural Gas – An unexpected destination
Readers of last week’s Monitor will recall a discussion around the Yamal LNG project, and the geopolitics that led to Chinese finance and participation replacing western funding, as a result of sanctions.
When President Putin pressed the button to start loading the first LNG carrier, Total’s brand new ice-breaking carrier, Christophe de Margerie, the vessel had been expected to make its way to Asia. In a strange twist of fate, the ship will now unload in Britain, hit by a series of events that have conspired to drive up gas prices to levels not seen in many years. President Putin must be smiling to himself at the irony of such an outcome, given the part that Britain played in the sanctions that led to the pivot towards China.
But with an explosion in Austria at a key gas hub, disruption in Norway and in the North Sea, the record cold temperatures that saw parts of Britain in a deep freeze at -13C, gas demand has rocketed. The turn of events has exacerbated what was already a bad supply situation, and turned it into a crisis whereby any UK-bound gas that can be sourced is a good result, no matter the political embarrassment.
In the meantime, while the wholesale market mechanisms that have been operating in Britain for many years were able to attract Total’s vessel full of Yamal LNG, China with its regulated citygate prices, lost out. In the last week, the natural gas shortages in China, which were highlighted last week, have become even worse, with many industrial and commercial facilities now deprived of their gas supply to divert it to residential and power uses.
On one level, the severe shortages this winter are a measure of just how successful the Chinese government’s attempts to curb the burning of coal have been. On the other hand, the impact on businesses and industry, many of which are shut down for the foreseeable future, has been a big downside.
But perhaps the biggest conclusion of all this is that today, more than ever before, a global, dynamic and responsive LNG market exists that is able to move vast amounts of energy around the globe in response to price signals. The consequences of this have been discussed in this Monitor before, and while weather and other disruption will always create global price arbitrage, a global mechanism for setting gas prices appears to be finally within reach.
Crude Oil – Production growth could restrain crude prices
Although OPEC is expected to restrain production growth, EIA forecasts that higher output from non-OPEC countries will contribute to overall growth in world liquid fuels production in 2018. The EIA’s December Short-Term Energy Outlook (STEO) expects global liquid fuels demand to increase in 2018, but not keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018.
Even with higher oil prices, EIA expects global liquid fuels demand to increase by more than 1.6 million barrels per day in 2018, up from growth of almost 1.4 million barrels per day in 2017. In spite of strong demand growth, demand is not forecast to keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018.
EIA expects that crude oil price increases in late 2017 will support growth in US crude oil production to more than 10.0 million barrels per day by mid-2018. Overall US crude oil production is forecast to increase by an average of 0.8 million barrels per day in 2018. Canada, Brazil, Norway, the United Kingdom, and Kazakhstan are also forecast to add a combined 0.7 million barrels per day of growth in liquids production in 2018.
This growth, together with the forecast 0.3 million barrels per day growth in OPEC crude oil production and another 0.1 million barrels per day increase in OPEC non-crude liquids production, results in forecast total global liquids production growth of 2.0 million barrels per day in 2018.
The forecast for crude prices remains highly uncertain; EIA forecast that crude supply will be above demand in 2018, putting downward pressure on global crude prices in 2018.
Oil Drilling Activity
Total US rig count (including the Gulf of Mexico) stands at 930, down 1 this week with rigs targeting oil down 4. The horizontal rig count stands at 801, up 5 this week.
The total number of active onshore rigs remained flat at 909. Compared to a November 2014 figure of 1,876 active rigs, the level remains 50% below the 2014 high.
Across the three major unconventional oil basins, the oilrig total decreased 2; it stands at 598, with Permian down 3, Eagle Ford flat and Williston up 1.
Crude Oil Price
Brent, the global benchmark for oil, rose US$0.17 to US$63.49 a barrel, reflecting a gain of 0.27% on the week.
WTI crude decreased US$0.24 to US$57.36 a barrel, down 0.42% on the week.
US Crude Oil Supply and Demand
US crude oil refinery inputs averaged 17.0 million barrels per day, with refineries at 93.4% of their operating capacity last week. This is 243,000 barrels per day less than the previous week’s average.
US gasoline demand over the past four weeks was at 9.1 million barrels, up 1.6% from a year ago. Total commercial petroleum inventories decreased 2.6 million barrels last week.
On the supply side, EIA data indicated that total domestic crude production increased 73,000 barrels to 9.780 million barrels a day. The Lower 48 crude production now stands at 9.256 million barrels per day, surging 65,000 barrels this week.
US crude imports averaged 7.4 million barrels per day last week, an increase of 161,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.4 million barrels per day, 3.3% less than the same four-week period last year.
Crude oil inventories decreased 5.1 million barrels from the previous week. The crude stored at Cushing (the main price point for WTI) decreased 3.4 million barrels; total storage is 52.2 million barrels (~58% utilization).
- GCA Oil & Gas Monitor
- Latin America
- North America
- Asia-Pacific & China
- Middle East
- Russia & Caspian
- Business of Energy
- Midstream & Downstream
- Gas & LNG
- Meet our Experts
- Project Experience Brochures
- Training Business
- GCA Oil & Gas Monitor: 2019 archive
- GCA Oil & Gas Monitor: 2018 archive
- US Oil & Gas Monitor: 2017 archive
- US Oil & Gas Monitor: 2016 archive
- US Oil & Gas Monitor: 2015 archive
We're here to help
Europe / Africa / Middle East / Russia & Caspian
gaffney-cline & associates