The IEA Oil Market Report, full issue, is now available to the public. Some interesting observations:
Non-OPEC oil supplies are nevertheless seen sharply lower in December. Overall supplies are estimated to have slipped by more than 0.6 mb/d from the month prior, to 57.4 mb/d. A seasonal decline in biofuel production, largely due to the Brazilian sugar cane harvest, of nearly 0.4 mb/d was the largest contributor to December’s drop. Production in Vietnam, Kazakhstan, Azerbaijan and the US was also seen easing from both November’s level and compared with a year earlier. Persistently low production in Mexico and Yemen were other contributors to the year-on-year decline.
As such, total non-OPEC liquids output slipped below the year earlier level for the first time since September 2012. A production surge in December 2014 inflates the annual decline rate, but the drop is nevertheless significant should these estimates be confirmed by firm data. Already in November, growth in non-OPEC supply had slipped to 640 kb/d, from as much as 2.9 mb/d at the end of 2014, and 2.4 mb/d for 2014 as a whole. For 2015, supplies look likely to post an increase of 1.4 mb/d for the year, before contracting by nearly 0.6 mb/d in 2016. A prolonged period of oil at sub-$30/bbl puts additional volumes at risk of shut in as realised prices fall close to operating costs for some producers.
The IEA has every month of 2016 Non-OPEC production below the year over year 2015 production.
For the past four years, North America has carried the load as far as the increase in Non-OPEC production is concerned. Now the IEA believes North America will suffer the lions share of the decline in 2016.
The IEA says US Gulf of Mexico and NGLs will show an increase in 2016 but every other location will show a decline with Texas showing the largest decline.
The IEA says Non-OPEC production was up 1.3 million bpd in 2015 but will be down .7 million bpd in 2016. Below are their numbers. They do not include biofuels or process gain.
The IEA has Non-OPEC liquids in December 2015 down about 650,000 bpd compared to December 2014.
But if the IEA expects Non-OPEC production to be down in 2016, how will world oil production be able to meet the ever rising demand? Simple, just pick up the phone and call OPEC. They will supply the needed barrels.
Data from Rystad Energy show the number of completed wells have by far outpaced the number of wells spudded (drilled) since 4Q14. Indeed, the number of well completions per month continued to increase several months after the rig count started to drop off, peaking at more than 1,600 wells in December 2014. The number of completions are still outpacing the number of new wells drilled, and as a result, the number of uncompleted wells, or the frack-log, has been cut down from its peak of around 4,600 wells hit at the end of 2014 to around 3,700 wells currently.
Make of the above chart what you will. I do not understand the spuds going to zero. Spuds are, quite obviously, not at zero. But then it’s not my chart.
And here are a few charts of my own. I thought it would be interesting to make some comparisons between price, rig count and production. In all charts below the right axis is always color coded with the chart data. All data is through December 2015 unless otherwise noted.
The above rig count is just the oil rig count, not the total rig count. There is obviously a delay between rig count and production. Just how many months that delay is, is not completely clear.
All price data is from Index Mundi and is the average of three spot prices; Dated Brent, West Texas Intermediate, and the Dubai Fateh, in US Dollars per Barrel. Quite obviously the rig count follows the price with a delay of from one year to as little as three or four months.
And production follows price, somewhat, with a delay that is hard to calculate.
Well, production has followed price in the USA and Canada. But elsewhere everyone just seems to be producing flat out regardless of the price. Just as the price was peaking in early 2011, Non-OPEC production, less USA and Canada, began to decline. Production in this chart is only through October.
The recent surge in world production that was brought about by high prices was a USA and Canadian phenomenon only.
Edit: The above statement has created some confusion. There have definitely been some serious production gains by Iraq and Saudi Arabia. But those gains came largely after the price of oil had already started to collapse. Those gains were despite collapsing oil prices, not because of high prices.