Tag: Global Oil Market

World Oil Supply And Price Outlook, July 2021

Posted on by Robert Boslego

The Energy Information Administration released its Short-Term Energy Outlook for July, and it shows that OECD oil inventories likely peaked at 3.207 billion in July 2020. In June 2021, it estimated stocks fell by 12 million barrels to end at 2.864 billion, 337 million barrels lower than a year ago.

The EIA estimated global oil production at 96.75 million barrels per day (mmbd) for June, compared to global oil consumption of 97.90 mmbd. That implies an undersupply of 1.15 mmb/d, or 34 million barrels for the month. Given the decrease in OECD stocks, non-OECD stocks are implied to have increased by 20 million barrels.

For 2021, OECD inventories are now projected to draw by net 194 million barrels to 2.832 billion. For 2022 it forecasts that stocks will build by 76 million barrels to end the year at 2.908 billion.

OECD Global Oil Inventories

The EIA forecast does not incorporate the OPEC+ plan to increase production by 400,000 b/d each month from August to December. The plan was not formally put into place because of an objection by the UAE to obtain a higher quota. All OPEC decisions must be unanimous. However, UAE's energy ministry said on July 14th that there had been significant progress in resolving its standoff with OPEC+ and that a compromise deal is being discussed that will raise the UAE's crude production quota to 3.65 million bpd from about 3.17 mmbd currently.

The current “reference production” and adjustments levels are detailed in the table below. Continue reading "World Oil Supply And Price Outlook, July 2021" →

Oil Price Spike Will Most Likely Be Averted

Posted on by Robert Boslego

Uncertainties for the balance of 2018 imply that stocks could fall sharply or be adequate. As a result, prices may spike or drop into the $50s, depending on what unfolds.

President Trump has sway over Saudi Arabia and the other Gulf producers. He can also fine-tune the implementation of sanctions on Iran and waivers to them. I’m expecting he will do whatever he has to, to avert a price spike going into the November mid-term elections.

July Production Changes

OPEC estimated in its August Monthly Oil Market Report (MOMR) that its crude production in July averaged 32.323 million barrels per day (mmbd). That was about 40,000 b/d higher than in June. The “compliance” level with the 2016 deal dropped to 97%, the first time less than 100% in nearly a year.

Saudi Arabia’s production was reduced by about 52,000 b/d, but that was more than offset by gains of 79,000 b/d in Kuwait and 69,000 b/d in the UAE.

Iran’s production fell by 56,000 b/d while Venezuela’s output dropped 48,000 b/d. Libya’s output also dropped by 57,000 b/d. Continue reading "Oil Price Spike Will Most Likely Be Averted" →

Oil Market Scenarios And Risks: 4Q18

Posted on by Robert Boslego

Major uncertainties loom toward the end of the year when sanctions are currently scheduled to go into effect by the U.S. regarding Iran. The range of potential outcomes is large, as it is possible that a deal may be reached with Iran which avoids sanctions (Iranian President Hassan Rouhani in a speech Sunday did not rule out peace between the U.S. and Iran), or Iran increases its exports to China and India, offsetting decreases to European countries. But the base case should assume some loss, on the order of 600,000 b/d.

President Trump has a few policy options to manage the size of the loss:

  • Pressuring the Saudis and other Gulf producers to maximize their output
  • Granting waivers so that more exports can flow
  • Ordering drawdowns of the Strategic Petroleum Reserve, potentially coordinated with the International Energy Agency

But Iran’s production is not the only risk. Venezuela’s production is in a meltdown and production may drop to just one million barrels per day by the end of the year. Whether it could stabilize at that level is an open question and is sure to provide a risk premium to oil futures prices.

I created three scenarios to develop a range of likely global inventory levels and future oil prices. The base case “demand for OPEC crude” is from OPEC’s own July Monthly Oil Market Report. In all three scenarios, I assume production in Venezuela drops to one million barrels per day (mmbd) by 1Q19 and stabilizes there. I also assume that Saudi production rises to 11 mmbd and remains at that level and production increases in the UAE and Kuwait. Continue reading "Oil Market Scenarios And Risks: 4Q18" →

What Oil Price Band Do The Saudis Want?

Posted on by Robert Boslego

Robert Boslego - INO.com Contributor - Energies


Back in December, I deduced that the Saudis had budgeted a little less than $53 for oil in 2017. Their budget was based on their belief that they didn't expect to see any U.S. shale oil production response in 2017. Saudi Energy Minister Khalid A. Al-Falih said it in answer to a question in the press conference after the OPEC/non-OPEC meeting (see video starting at 51:35). He backed-up his belief basing it on the time lag of when oil prices had peaked in 2014 and when production peaked in 2015.

After the deals went into effect on January 1st, oil prices remained above $50 per barrel. According to the EIA’s weekly production data, U.S. crude production rose by 318,000 b/d between the last week of December and the week ending March 3rd, just before Al-Fahil’s speech in Houston during on March 7th.

U.S. Crude Production

He said he is optimistic about the global oil market in the weeks and months ahead, but "I caution that my optimism should not tip investors into 'irrational exuberance' or wishful thinking that OPEC or the Kingdom will underwrite the investments of others at our own expense." Continue reading "What Oil Price Band Do The Saudis Want?" →