Oil tracking trends

The fall in oil prices is squeezing upstream oil and gas investment, but it could be boosting overall oil demand, data from the International Energy Agency shows.
By The Bakken Magazine Staff | October 20, 2015

The fall in oil prices is squeezing upstream oil and gas investment, but it could be boosting overall oil demand, data from the International Energy Agency shows. Market adjustments are looming, the IEA said during an October presentation in Istanbul. According to the globally recognized energy analysis group, tightening global oil supply guided by low oil prices could reduce 2016 production volumes by roughly 500,000 barrels per day. The IEA’s belief is that as oil prices continue trading in the $50/b range, production in North America and a handful of other global production zones will not continue to supply at current levels. Volatile oil prices have already impacted production in the U.S., North Sea and Russia. Next year, IEA believes production in the U.S. will drop by 400,000 bpd.

“While oil’s recent volatility has been unnerving—Brent crude jolted from a six-year low below $43/b to above $50/b in the space of days—the lower price environment is forcing the market to behave as it should by shutting in output and coaxing demand,” IEA said.

In the U.S., demand will remain at above-trend levels through 2016. Despite the uncertainty in China’s economy and growth rate, the world's second largest oil consumer will continue to purchase crude at current levels, IEA believes. Beijing will also buy extra crude to fill up its strategic reserve.

By the second half of 2016, the world will start to siphon off record-high oil stocks. Until then, the U.S. and others will experience the greatest production declines. The anticipated loss of non-OPEC output suggests that unless prices recover, “lower-cost OPEC producers would need to turn up the taps during the second half of 2016 to keep the market in balance,” IEA said.

US Oil Report
For the first time ever, the U.S. Energy Information Administration is tracking U.S. petroleum supply on a monthly basis. Based on survey results from participating states, the EIA is now able to provide a more accurate and timely glimpse into U.S. crude production. Adam Sieminski, EIA administrator, said the new survey-based results is a significant improvement over the way the EIA previously reported U.S. production that relied on tax information and random production statistics provided by state agencies.

Under the new survey model, information that was once several months late or incomplete, is now more accurate and timely due to the participation of regional entities more capable of providing accurate data. The first report issued in August included information provided by 13 states, including: North Dakota, Montana, Wyoming, California, Arkansas, Colorado, Kansas, Louisiana, New Mexico, Ohio, Pennsylvania, Texas and Utah. Information from the survey, which will add more state data later this year, will be used in several EIA products, including the Short-Term Energy Outlook and the Annual Energy Outlook. In addition to production volumes by state, the EIA intends to add to its monthly petroleum report by including information on oil production by density as measured by API gravity.