Bad News For OPEC: EIA Sees US Oil Production +0.97 Mmb/d YoY In 2018 Using WTI $55.33/b

Its hard to believe there is bad news for OPEC with Brent trading this morning at $69.60 (830am MST), but there is bad news or at least a wake call for OPEC with the EIA increasing its US oil production growth forecast to 0.97 mmb/d YoY in 2018, up from its Dec forecast of 0.78 mmb/d YoY growth in 2018.  And this wake up call will be even louder next month as the EIA will likely increase its 2018 US oil growth again as the Jan 2018 forecast is based on WTI $55.33/b.   The last thing OPEC wants is to see greater than expected oil supply growth, especially in Q4/18 when the OPEC cuts are scheduled to end.  Its why we expect to see OPEC increasingly talk down oil markets by reminding that the cuts continue to show rebalancing is on track, but that rebalancing is still later in 2018.  OPEC’s challenge has switched from getting Brent to $60 to trying to make sure high oil prices don’t lead to oil supply surprising to the upside just as OPEC wants to end it cuts. This is especially so if the cuts end at Dec 31, 2018 as oil demand is always seasonally lower in Q1 than in the summer seasons.  Look for more OPEC comments like this morning’s comments from the UAE oil minister that oil rebalancing is not there yet. Continue reading “Bad News For OPEC: EIA Sees US Oil Production +0.97 Mmb/d YoY In 2018 Using WTI $55.33/b”

Good News For OPEC, International Rigs Not Yet Responding To Brent’s Recent Move To High $60s

There was good news for OPEC yesterday with the Baker Hughes worldwide rig counts for Dec 2017 showing that rig counts, outside of the US, haven’t really increased with the recent strength in Brent now in the high $60s.  Our blog may only say “OPEC” cuts, but we are referring to the collective OPEC/non-OPEC (ie. including Russia) cuts.   US shale is the primary focus/concern for OPEC and they probably just want US shale growth to be under 1 million b/d in 2018.  But the focus will also include rest of world excluding the US and OPEC/non-OPEC cut group (ROW) and the last thing OPEC wants is to see ROW have big rig increases and add oil supply growth before Dec 31, 2018, when the OPEC cuts are scheduled to end.  Any significant increases in ROW oil supply could impact the math for oil markets rebalancing and make the exit from the cuts more challenging, especially since global oil demand is always seasonally lower in Q1 of every year.  But for now, no real increase in ROW rigs means that OPEC remains on track to keep Brent in the $60s if it can maintain discipline on its cuts. Continue reading “Good News For OPEC, International Rigs Not Yet Responding To Brent’s Recent Move To High $60s”

Today’s 3.4 Earthquake In The Netherlands Should Be A Modest Positive To LNG Markets Rebalancing In Early 2020’s

There is no question that the stronger than expected LNG markets in H2/17 has been driven by China’s urgency in fighting pollution that has led to China’s LNG Dec imports being up 38% YoY to 7.8 bcf/d.  Its why we wrote out Sept 20 blog “China’s Plan To Increase Natural Gas To 10% Of Its Energy Mix Is A Global Game Changer Including For BC LNG[LINK].  However, we still look at events like today’s 3.4 earthquake in Groningen province (Netherlands) as a positive factor that will add support, albeit modest, to the faster than expected rebalancing to LNG markets.  The increasing earthquake activity in Groningen province led to the Dutch government regulating Groningen natural gas production down since Jan 1, 2014 (was 5.2 bcf/d in 2013, now 2.1 bcf/d).   We think the risk (increasing likelihood) is that this biggest earthquake since the 3.6 in Aug 2012 is likely to be a catalyst to a further regulated reduction in Groningen natural gas production and therefore increase Netherlands LNG imports ie. a modest positive to LNG markets. Continue reading “Today’s 3.4 Earthquake In The Netherlands Should Be A Modest Positive To LNG Markets Rebalancing In Early 2020’s”