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Page added on May 13, 2015
Oil Glut Worsens as OPEC Market-Share Battle Just Beginning
A global oil glut is building as OPEC kingpin Saudi Arabia pumps near record highs in an attempt to win a market-share battle against stubbornly resistant U.S. shale production, the International Energy Agency (IEA) said on Wednesday.
The West’s energy watchdog said in a monthly report that although higher-than-expected oil demand was helping to ease the glut, growth in global oil consumption was far from spectacular.
As a result, signs are emerging that the crude oil glut is shifting into refined products markets, which could make a recent rally in oil prices unsustainable.
“Despite tentatively bullish signals in the United States, and barring any unforeseen disruption elsewhere, the market’s short-term fundamentals still look relatively loose,” said the IEA, which coordinates energy policies of industrial nations.
Global oil production exceeds demand by around 2 million barrels per day, or over 2 percent, following spectacular growth in U.S. shale production and OPEC’s decision last year not to curtail output in a bid to force higher-cost U.S. producers to cut theirs.
As a result, benchmark Brent oil prices more than halved from June 2014 to $46 per barrel in January. They have since rebounded to around $65, however, on fears of a steep slowdown in U.S. production growth.
“In the supposed standoff between OPEC and U.S. light tight oil (LTO), LTO appears to have blinked. Following months of cost cutting and a 60 percent plunge in the U.S. rig count, the relentless rise in U.S. supply seems to be finally abating,” the IEA said.
But it added that the recent oil price rebound was giving U.S. producers a new lease on life.
“Several large LTO producers have been boasting of achieving large reductions in production costs in recent weeks. At the same time, producer hedging has reportedly gone steeply up, as companies took advantage of the rally to lock in profits,” the IEA said.
“It would thus be premature to suggest that OPEC has won the battle for market share. The battle, rather, has just started.”
Despite a certain slowdown in U.S. oil output growth, global crude supply was up by a staggering 3.2 million bpd in April year-on-year, the IEA said.
Beyond high OPEC production, the IEA cited strong performance of non-OPEC countries including Russia, Brazil, China, Vietnam and Malaysia.
The IEA lifted its 2015 forecast for non-OPEC supply growth by 200,000 bpd since last month’s report, saying non-OPEC producers will contribute 830,000 bpd of additional supplies in 2015.
GLUT IN REFINED PRODUCTS
The IEA left its 2015 oil demand growth forecast broadly unchanged from last month at 1.1 million bpd, to 93.6 million bpd, up from 0.7 million in 2014.
It said an improving economic outlook for Europe was offset by reduced expectations for oil demand growth in the former Soviet Union, the Middle East and Latin America.
In another bearish sign for oil prices, U.S. product stocks built counter-seasonally in March, and China posted record-high distillate builds, the IEA said.
“Preliminary data show OECD-wide product stocks stopped drawing and swung into growth in April. More such builds may follow as global demand goes through a seasonal soft patch and refining activity increases worldwide,” it said.
Adding to the bearishness, the IEA said it saw little sign of OPEC curtailing its output in the next month, saying early soundings suggested the producer group will sustain rates at around 31 million bpd during May.
“Bucking the global trend, Kuwait, Saudi Arabia and the UAE are all raising their rig count and expanding their drilling programs. Iraq and Libya, meanwhile, continue to raise production against all odds. And Iranian supplies hit their highest since July 2012,” it said.
April marked the 12th consecutive month in which OPEC production ran above the group’s self-imposed 30 million bpd supply target and was up nearly 1.4 million on the year before as top exporter Saudi Arabia held flows above 10 million.
The IEA said it cut its call on OPEC crude by 0.3 million bpd to 30 million bpd for the second half of 2015 due to upward revisions to non-OPEC supply growth.
29 Comments on "Oil Glut Worsens as OPEC Market-Share Battle Just Beginning"
rockman on Wed, 13th May 2015 6:53 am
“But it added that the recent oil price rebound was giving U.S. producers a new lease on life.” Of course it has…that’s why the rig count has jumped back up above 1,000.
Sorry…dozed off for a moment there and was dreaming…just like this clown. LOL. Of course the total rig count is still dropping although not nearly as fast as it was…but still dropping none the less.
Of course the KSA et al (including US operators) are pumping as fast as possible: that’s what we’ve always done in the face of a price collapse. Except for the KSA back in the 80’s when they kept cutting production trying to get prices back up. And was rewarded by losing $billions in revenue and continued lower oil prices. They’ve obviously learned there lesson.
So bizarre how almost all the “experts” want to blame the KSA for the “glut”. What about every other oil producer, including virtually every US company, ALSO NOT CUTTING PRODUCTION? After all the KSA economy is dominated by its oil export revenue…it would collapse in just months if it didn’t pump every bbl possible. So what about Norway…a much smaller chunk of their economy is dependent upon oil exports and they also have $billions in the oil generated sovereign fund…why isn’t anyone accusing them of trying to hurt US shale producers? And closer to home: Canada…it’s hitting record high exports to the US almost monthly. Being the largest source of imported oil aren’t they hurting the US shale producers more then any other oil exporter?
Yet it’s KSA this and that and so on and so on. Waaa! The KSA is so mean to us. LOL.
Davy on Wed, 13th May 2015 7:00 am
There is far too much unsettling economic news to forecast oil consumption and production. One thing is sure this is the most critical time in our history in regards to economics and oil production. We are at a pinnacle but also looking into a precipitous.
Demand and supply destruction once in motion will have momentum. Instead of the inertia of growth to flip the equation back positive as has always happened in the past we are facing a time where the inertia is towards further demand and supply destruction creating positive feedbacks amplifying the downward spiral.
We know the economy is suffering limits and diminishing returns. We have the economic ills of corruption, manipulation, wealth transfer, debt distortions, and price discovery repression. On the oil side we clearly have a series of systematic peak oil dynamics above and below ground becoming an issue.
We are still at or near the pinnacle of society’s economic range. Per capita issues are not too great yet. BAU is triaging out countries and social sectors to maintain growth of a few at the expense of many. At the moment population can grow and still not caused cascading social fabric damage of failed states and internal strife in critical economic powers.
This BAU pinnacle I feel is in a bumpy descent but it very well could still be in a bumpy plateau. There is no way to tell this. Official statistics and reporting is not reliable. The new normal is a controlled global economy. Markets are maintained by false illusions all the debt and investments have value into the future. All the massive mal-investment especially in China and the US is just extended and pretended into the future as if economic osmosis will eventually correct the imbalances. There are so many entities of all kinds at all levels technically insolvent by previous accounting fundamentals.
This economic disequilibrium is facing pressure from food, water, and ecosystem decline. Every one of these other predicaments are getting worse not better. The oil dynamics is further in a position of potential decline. In the oil sector it is as if we have used up almost all the ammo. We are getting down to the remaining armament that is not adequate for the challenge. We may have allot of small arms but we need the big arms to fight off an overrun from entropy.
Once society has even a small amount of fuel shortages all hell will break lose. The same is true with food and water if widespread enough. The basics of growth of BAU must include food, water, and oil growth. This can be masked for a time by various tricks but at some point the obviousness of limits and diminishing returns will be mainstream. No amount of efficiency and decouple talk will work when we are clearly in a shortage environment.
It is quite possible the next few years the economy and financial system will continue to be repressed for growth of the few at the expense of the many. The food and water issues can be maintained IOW no adverse acts of God or economic disruptions causing global issues. Oil dynamics may see decline but with consumption in decline there is still a balance.
The issue is once the momentum of the downward cycle is in place on oil, food, and water there can never be renewed growth of BAU. If BAU financial and economic situation does not improve there can never be maintenance of food, water, and oil growth. The synergies of these two fundamentals to BAU must be in a healthy economic range. Divergence of any of these fundamentals is deadly to a system that must grow or face collapse into a vacuum. I say vacuum because we cannot just degrowth to a 19th or 20th century complexity. We cast those abilities off in the name of growth and efficiency. We also allowed our population to treble.
All this while population grows. Once population faces excess deaths over births we are likewise going to see unstoppable economic pressures. Deaths are expensive for our system. We need increasing population to make the economy work.
All these issues cannot be overcome. It is just a matter of time. The time value of humans makes a 10 year time frame unimportant. Even 5 years can be talked away. So often with BAU deadly problems are claimed to be far in the future with technical solutions waiting in the wings.
We are now at a point where technology will not work and foundational resources cannot be substituted or used more efficiently. We are cutting into the bone and muscle. The fat is gone. The end is near of the world as we have known it.
Nony on Wed, 13th May 2015 7:53 am
CLR and EOG say they need 70+ WTI to start increasing rig count. We are $10 shy of that.
The “fault” for the glut lies with US producers or with the market for not realizing the strength of US production (staying power, growth power at $100). People like Hamilton completely missed the boat on the basic insight that US shale is the marginal barrel (and not a mirage, not at $100).
Now we have a glut to work off and we have to settle out at some equilibrium.
GregT on Wed, 13th May 2015 8:31 am
The “fault” lies with the eCONomists and their never ending mantra of ‘growth’.
Infinite exponential growth in a finite environment is a physical and mathematical impossibility. At this point in time, any continuation of growth is only accelerating our species demise, up to, and probably including our own extinction.
The psychopaths are in control of the asylum, and they are going to burn it to the ground.
Davy on Wed, 13th May 2015 8:32 am
The fault for the glut lies squarely at the feet of the central banks and a failing policies of financial repression and economic extend and pretend. NOo, your problem is your a specialist and the only way you can get your fancy wonder words around this excess oil supply is within the oil sector business dynamics and oil financials.
I am not saying these issues are not important they are. They play a part but you are dismissing any issues of demand stagnation per what should have occurred per past periods of lower oil prices.
You dismiss the dangerous situation in the junk bond market and the whole bond market for that matter. You discount the carnage in the entire global oil sector as well if magically there will be a return to heated activity once prices rise to that sweet spot IOW the NOo breakout point. You then do your typical Hamilton bashing as if that makes your point gospel. NOo, get your head out of your arse.
JuanP on Wed, 13th May 2015 8:57 am
Rock “Of course it has…that’s why the rig count has jumped back up above 1,000.”
LOL. You got me, Rock. I fell for it like a dupe. I was like: What the f*ck! When did that happen? How could I miss that? Still LOL. 😉
BobInget on Wed, 13th May 2015 9:26 am
News: five minutes ago:
Islamic State deputy leader ‘killed’
Abdul Rahman Mustafa al-Qaduli, also known as Abdul Rahman Mustafa Mohammed and Abu Alaa al-Afri (US state department)
The second-in-command of Islamic State, Abu Alaa al-Afri, has been killed in a US-led coalition air strike, the Iraqi government says.
5 minutes ago BBC
From the section Middle East
BobInget on Wed, 13th May 2015 9:33 am
A board reminder: two OPEC members are at war with each other.
Everyone else, (in Pentagon speak)’ are collateral damage’.
BobInget on Wed, 13th May 2015 9:39 am
You have to give this live chart a look.
http://www.livecharts.co.uk/MarketCharts/crude.php
check out oil’s price drop when news of IS
leader’s untimely death was announced.
Coke head traders have zero grasp of Mideast politics but they do know it’s more about oil and power then ‘religion’.
BobInget on Wed, 13th May 2015 10:10 am
More on topic.
OPEC, in it’s current configuration is a dead letter.
OPEC was a functioning cartel before KSA insisted on increased production in a three pronged effort to hurt Iran, Russia, left wing Venezuela and over bought US shale interests.
In addition, four years of proxy war, then as now in Syria, with non member Russia and Iran
was beginning to effect Saudi profits
Top that off with never ending (it seems) crude oil aid to Pakistan and Egypt.
Then, just when KSA asked for pay-back, BOTH Egypt and Pakistan refused to help kill Yemenis.
IT’s true, everyone involved is overdoing it trying to show how much crude is available.
In every OPEC member’s case, shutting down exports would be unthinkable.
Boys and girl, observe closely. There’s history being made daily and your alive watching.
Pure conjecture.
I have a hunch Iran will risk delivering longer range missiles to Yemen targeting Saudi oil works. So as not to show a return address,
these missiles won’t be Iranian but North Korean or Chinese.
rockman on Wed, 13th May 2015 11:00 am
Juan – That’s exactly why I teased about it. The talking heads will make grandiose statements and carefully avoid mentioning the actual numbers that completely disprove their spin.
Davy on Wed, 13th May 2015 11:28 am
Bobby, listen to the Rock. Rock says
“So bizarre how almost all the “experts” want to blame the KSA for the “glut”. What about every other oil producer, including virtually every US company, ALSO NOT CUTTING PRODUCTION? After all the KSA economy is dominated by its oil export revenue”
Bobby, if this was KSA flooding arms into a conflict as an example your thinking holds up but this a global resource market. KSA can be said to no longer have interest in price management now they are interested in maximizing revenue. If there are secondary benefits great for them. KSA is not in a position to forgo revenue. The country is far too unstable to risk exhausting its coffers. Enough of the conspiracy theories from you, MSM, and ZH.
Majed on Wed, 13th May 2015 12:09 pm
I like intelligent people .
Thank you rockman
steve on Wed, 13th May 2015 12:27 pm
Canada is broke the U.S is broke…Europe, Asia, Russia, Japan etc…what country has not manipulated its currency in someway and is not broke?..we are running this system without a neutral and there is no telling where the fire is going to happen but happen it will. I just hope the U.S does not panic and start ww3…Amerika makes me very nervous…5 to 10 years of this without falling apart seems very optimistic….
BC on Wed, 13th May 2015 2:24 pm
steve, you (we) have good reason to infer that the US will start WW III. The militarist-imperialist, rentier-socialist Anglo-American-Zionist corporate-state uses war as a kind of global business strategy.
ECONomics is politics. Politics is war by other means. War is the business of empire. War is good business for imperialists.
Ergo, eCONomics is the intellectual and political (sophist) rationalization for imperial never-ending war for profits for the top 0.001-1% owners of the rentier-socialist corporate-state.
One can say that without being disparaging or presenting it as a strong critique; rather, it is an accurate description of the system as it has evolved since WW I-II and the 1970s-80s, irrespective of one’s politics or self-interested financial and economic perspective.
It is what it is.
Northwest Resident on Wed, 13th May 2015 2:56 pm
BC — So true. But here’s another perspective:
War is a human adaptive response to over-crowding and to resource depletion. War IS our innate method of population control. War is also the Darwinian vehicle that insures survival of the fittest males and females. The strongest, healthiest, fastest, smartest, sneakiest (etc) men survive wars more frequently than their opposites, and with a vastly depleted male population in relation to female population, the males tend to get the pick of the litter (so to speak), insuring that the most attractive, healthiest and in general “best” females tend to get selected for mating and genetic reproduction.
Then came nuclear weapons and mechanized warfare, where any weak weasel sitting safely behind lines with his finger on a big red button could wipe out legions of better men. The human self-regulating Darwinian “method” of population control was defiled. Modern medicine also did it’s part. Now here we are, stuck with millions and probably billions of weak, sick, grotesquely fat, lazy, stupid, moronic, (your adjective here) people that in “the good old days” would never have made it past age ten, if even that far.
We live in a universe where creation is the result of destruction and destruction is the result of creation. By trying to harness god-like powers and hold off our own deaths, to artificially increase the span of our own trivial lives, we subject ourselves to weakness, disease, humiliation, suffering and excessive resource consumption — for a few more years.
The rubber band of our technological span of time on earth is stretched as far as it can stretch. Nature and immutable physical law flat out guarantees that the snapback is going to be a real bitch. It didn’t have to be this way. We could have lived within our means, we could have maintained our relationship with nature, we could have accepted our deaths and short life spans as a fact of nature and cherished the time we had. But we didn’t. No, there is going to be hell to pay.
Billions. Sooner or later. Looking like sooner rather than later. To think that we all might realistically (and most likely) witness and be a part of that epic event is a very sobering thought.
Davy on Wed, 13th May 2015 3:29 pm
N/R, well put brother in doom.
Apneaman on Wed, 13th May 2015 4:00 pm
Northwest Resident, I would put sneaky at the beginning of your list. Also, it true what you say about the sick fat people, but they are not necessarily the lazy, stupid, moronic ones. The best illustration is diabetics living to breeding age and passing their genes since the discovery of insulin in the 1920’s here in Canada. Many diabetics have been upstanding citizens and made many contributions in all walks of life. Once the system goes down and insulin is no longer available for most of them (type 1) they will die in huge numbers. As it stands now both type 1 and 2 are on the rise.
shortonoil on Wed, 13th May 2015 4:06 pm
“The fault for the glut lies squarely at the feet of the central banks and a failing policies of financial repression and economic extend and pretend.”
The monetary system has aggravated the situation, but it is not responsible for it. The present oversupply is the result of the energy dynamics of petroleum production. Petroleum will never again be able to supply enough energy to the economy for it to acquire all of its production. That ceased being possible in 2012 when it pasted the energy half way point. This is analogous to a debt based monetary system that only creates enough money to cover the principal, but not the interest on that principal. There is never enough money in the system to pay off the total debt; principal, plus interest. The debt must grow continuously for the system to exist.
Since 2012, the petroleum production system must shrink continuously for the system to exist. That will occur from a continually declining price that will shrink production. Depletion is rearing its ugly head in ways that few foresaw.
http://www.thehillsgroup.org
Nony on Wed, 13th May 2015 4:56 pm
Bakken production went up in March. Woot, woot! Go cornie! Go cornie!
https://www.youtube.com/watch?v=art8HCFGXv8
GregT on Wed, 13th May 2015 5:39 pm
“US Navy predicts summer ice free Arctic by 2016”
“Commenting on the study, the US National Snow & Ice Data Centre (NSIDC) observes:
“Ship-based observations show that methane concentrations in the air above the East Siberian Sea Shelf are nearly twice as high as the global average… Layers of sediment below the permafrost slowly emit methane gas, and this gas has been trapped for millennia beneath the permafrost. As sea levels rose at the end of the ice age, the shelf was once again covered by relatively warm ocean water, thawing the permafrost and releasing the trapped methane… In the short-term… methane has a global warming potential 86 times that of carbon dioxide.”
“Last year Prof Duarte was lead author of a paper in the Royal Swedish Academy of Science’s journal AMBIO warning that the Arctic was at risk of passing critical “tipping points” that could lead to a cascading “domino effect once the summer sea ice is lost.” Prof Duarte said at the time:
“If set in motion, they can generate profound climate change which places the Arctic not at the periphery but at the core of the Earth system. There is evidence that these forces are starting to be set in motion. This has major consequences for the future of human kind as climate change progresses.”
http://www.theguardian.com/environment/earth-insight/2013/dec/09/us-navy-arctic-sea-ice-2016-melt
Woot woot, foolish little child.
Davy on Wed, 13th May 2015 5:57 pm
Greg, NOo cant figure out AGW climate change because it is hard to fit it into a supply and demand curve. He thinks it is elastic over time though per his thoughts on Hamilton.
Nony on Wed, 13th May 2015 6:11 pm
I think AGW is a reasonable concern. But if you really think we are “running out”, then you would not be worried about AGW. Having the combined worries just shows what hypocrites peakers are. It’s not about their silly Staniford-Simmons-Hamilton-Rune failed predictions but about “wishcasting” to their environmental politics. It just shows the whole amateur oil estimation was full of it.
Perk Earl on Wed, 13th May 2015 6:16 pm
http://neven1.typepad.com/
GregT the above link is a good one for updates on arctic melt, particularly as this melt season just starts to gain momentum. 2013 & 2014 were years in which more long term ice was added to the overall mix of ice. 2015 so far looks like it could be a big melt year due to El Nino, but the only way to know is to tune into that link.
On the right of Neven’s website is a link called Arctic Sea Ice Graphs which has many different types of up to date arctic ice graphs.
The Artic ice would really need to go on a wild melt ride to meet the Navy’s prediction of 2016, just this melt season and next to reach ice free, but we’ll see.
As far as methane and CO2 emitting from the arctic circle, it does seem to be ramping up. We are toying with a potential tipping point, past which things could really spiral out of control. Yet the denial by many continues and growth is the mantra of BAU.
shortonoil on Wed, 13th May 2015 6:24 pm
Bakken production went up in March. Woot, woot! Go cornie! Go cornie!
The EIA is predicting the Bakken to be down 31k barrels per day June vs May.
http://www.eia.gov/petroleum/drilling/pdf/bakken.pdf
Are you making this up as you go, or are you using the “FORCE”?
GregT on Wed, 13th May 2015 6:39 pm
Nony,
Even if we stopped burning all fossil fuels today, there is a very real probability that we have already set the wheels in motion to cause a catastrophic runaway greenhouse event.
Fossil fuels are finite in nature. They will peak, and they will run out. At least from an economic perspective. There will be oil left in the ground long after the collapse of modern industrial society, it just won’t be profitable enough to extract.
Your posts here mainly focus on what you consider to be failed predictions. The timing of those predictions may have been off by a few years, but the outcome will be the same. The oil age will end in your lifetime Nony, like it or not. No amount of ignorance will change that fact.
Davy on Wed, 13th May 2015 6:51 pm
Wonder boy I like your word “wishcasting”. Yea man, we peakers are hard up for excitement so we wish the end of the world. We definitely are wishcasting that a critical mass of people will adopt a paradigm shift against the poor attitudes and lifestyles you and your corn huskers are promoting. We are wishcasting a plan B of mitigation and adaptation to the shit storm just ahead. This wishcasting is exciting because you corn huskers want us to go into the shit storm blind and without a compass like a bunch of drunk dipshits.
redpill on Wed, 13th May 2015 7:30 pm
Nony, could you attempt to clarify how it’s hypocritical to be concerned about both?
“Running Out” is bad, but it’s not The End, except for maybe the current economic construct. Oh, and yes, probably a significant thinning of the herd.
AGW is hopefully nothing more than a hoax to promote OWG, but I can’t dumb myself down enough to accept that input. AGW potentially means lasting damage to our biosphere and a much more severe thinning of the herd.
Perk Earl on Wed, 13th May 2015 8:24 pm
Oil price has recently been going back up because the value of the dollar has been sliding down.
Also, Fed raising interest rate is now projected to not occur until early in 2016! They could end QE but they can’t raise interest rates – ah ha!
http://www.reuters.com/article/2015/05/13/markets-forex-idUSL3N0Y47U320150513
FOREX-Dollar recoils as retail sales sting, kiwi soars
The dollar languished at three-month lows against a basket of major currencies early on Thursday after surprisingly soft retail sales prompted investors to wonder if the Federal Reserve can afford to hike interest rates at all this year.
The dollar index last traded at 93.630, having fallen as far as 93.461. It has now shed nearly 7 percent from a 12-year peak of 100.390 set in March.
Against the yen, the greenback slid to a two-week trough of 119.03, while the euro came within a whisker of a two-month peak of $1.1392 set last week. It last stood at $1.1355.
“Market expectations for a 2015 Fed hike have dropped further,” said Elsa Lignos, senior currency strategist at RBC, adding market pricing for a first full hike is now drifting into early next year.