The OPEC Monthly Oil Market Report (MOMR) for September 2024 was published recently. The last month reported in most of the OPEC charts that follow is August 2024 and output reported for OPEC nations is crude oil output in thousands of barrels per day (kb/d). In the OPEC charts below the blue line with markers is monthly output and the thin red line is the centered twelve month average (CTMA) output.
Output for June 2024 was revised lower by 27 kb/d and July 2024 output was revised lower by 28 kb/d compared to last month’s report. OPEC 12 output decreased by 197 kb/d with most of the decrease from Libya’s output (219 kb/d.) Iraq decreased by 50 kb/d, Nigeria increased crude output by 57 kb/d, Saudi Arabia saw a decrease of 25 kb/d.
The chart above shows output from the Big 4 OPEC producers that are subject to output quotas (Saudi Arabia, UAE, Iraq, and Kuwait), since the post pandemic peak in 2022 where centered 12 month average (CTMA) output from the Big 4 reached 20849 kb/d, crude output had been cut by 2266 kb/d relative to the 2022 CTMA peak to 18583 kb/d. Potentially the Big 4 may have roughly 2270 kb/d of spare capacity when World demand calls for an increase in output.
Since the pandemic the Big 4 OPEC producers output has been relatively flat with an increase to 2022Q3 and then back down up to 2024.
The OPEC Other 8 (not Big 4 OPEC producers) has increased at about 400 kb/d over the past 3 years on average.
My expectation is that future growth of C+C output in the US may be much lower than the recent past and possibly even no future growth in output. The World C+C minus OPEC Big 4 and US output has increased at about 860 kb/d over the past 3 years, if we deduct the OPEC Other 8 (from previous chart) increase of 400 kb/d, this leaves about a 460 kb/d increase for World minus US minus OPEC.
The chart above shows that all of the World increase in C+C output from the past 3 years was primarily from the US and the 5 nations in the chart above. Future increases in World output are likely to be from these 5 non-OPEC nations and the OPEC Big 4, if my assumption that US growth will be low is correct.
OECD stocks are close to the 2023 level and below the 5 year average. Brent crude prices remain under $75/b, which is $5/b less than last month. The World oil market seems adequately supplied with oil at present.
The World demand estimates for 2024 and 2025 were revised lower by 100 kb/d compared to last month, estimates are significantly higher than EIA estimates for World demand in 2024 and 2025. The supply estimates from the non-DOC were raised by 100 kb/d compared to last month. If World oil demand is as high as OPEC forecasts, the World may struggle to meet demand in 2025, though it seems likely that the 2025 World liquids demand estimate by OPEC is at least 1 Mb/d too high. If I am correct then the World will have adequate oil supply in 2025.
The OPEC forecast for US tight oil growth ha been revised lower since last month, though it still seems a bit optimistic.
Any thoughts on doombergs statement that only gas capacity is restricting shale oil production?
Sean,
Low natural gas prices may be reducing tight oil profits and reducing output, we will know more as more capacity gets built. Eventually tight oil output will fall, probably by 2028, meantime growth in tight oil output will either be slow or zero (no growth in output).
Russia, crude only. Data is through August 2024.
I believe Russia is at maximum production and is in slow decline.
Click on chart to enlarge.
Ron,
Part of the fall in Russia’s production may be due to western sanctions and part may be due to OPEC plus quotas. I doubt Russia returns to their 2019 peak, but they might return to 10 Mb/d if the war with Ukraine ends and with that the end to western sanctions.
I knew that would be your opinion Dennis. It is just that I believe you are wrong this time.
Ron,
Fair enough. Note that current crude target for Russia for OPEC plus agreement (DoC) for August 2024 is 8.98 Mb/d and according to OPEC secondary sources Russia’s crude output was 9.06 Mb/d in August, pretty close to their quota. When quotas have been removed we will have a better idea of what Russia can produce, in my opinion.
IEA has Russia’s capacity at 9.76 Mb/d in Sept Oil Market report and in 2022 OPEC secondary sources has Russian output at 9.77 Mb/d for the yearly average crude output.
https://www.iea.org/reports/oil-market-report-september-2024
Dennis/Ron
I think that Western sanctions are playing a big part in the drop of Russian crude because the drilling of new wells is being hampered by lack of spare/crucial drilling parts along with the expertise of knowing where to drill. Decline is also playing a roll. It will take a few more months of data to see if the decline continues slowly or stabilizes at some lower level.
According to Argus, Russian August crude production of 8,978 kb/d is essentially in compliance with their OPEC target of 8,980 kb/d. S & P Platts estimates Russian crude production to be 9,050 kb/d, close to the OPEC estimate of 9,059 kb/d.
Russia just looks after its own interests and has always over produced. Let’s see if the next Argus update shows production below OPEC’s Russia target.
DENNIS
the end to western sanctions.
Well maybe, but it’s hard to imagine a scenario where that happens in the short term. Putin seems unlikely to back down, and Ukraine can’t defeat Russia.
It’s hard to see what the latter would even mean. Overthrowing the government? That might end the sanctions, but won’t do oil production much good. And if Russia wins by conquering Ukraine, the sanctions won’t end.
It looks to me like Putin has put an end to Russia oil exports to the West for a couple of decades.
Alimbiquated,
There is the possibility that an extended stalemate could lead to a negotiated settlement. It is possible Russians may get tired of the Putin cult.
I am doubtful that Russian oil industry restriction by the ‘West’ will be lifted unless Russia gives back all of the Ukraine that it has taken. And that is not in cards.
My guess is that the war between Russia and Ukraine will end 3 to 7 years from now. Likely to he incorrect.
Dennis,
Thank you for the report. Much appreciated.
What is your view on the percentage chance of an economic slowdown or a recession into 2025 ?
I suspect you are correct that OPEC has a spare capacity of ~ 2 Mb/d. And future demand growth will come from a the 5 countries listed.
I assume you think chances are WTI prices will be in the range of 65-85 for this and next year ?
Iron Mike,
Thank you.
I would put the probability of a Worldwide Recession (which I define as less than zero World real GDP growth in a 12 month period) as less than a 10% probability. I expect future production growth from those 5 nations plus the OPEC Big 4, also possibly some growth from Russia and Venezuela if political problems are eventually resolved (this seems not likely in the next 5 years). Demand growth will come from non-OECD nations, but much of this may be offset eventually from lower demand from OECD and China over the next 10 years. Yes that would be my guess for oil prices in 2024 $ over 2024 and 2025 for average 12 month Brent oil prices.
For the most recent 12 months the average real Brent price has been $85/b in 2024 US$ with a range of $80/b to $96/b from Sept 2023 to August 2024, so a fall in oil prices to $65 per barrel for Brent in 2024$ for the 12 month average price seems quite unlikely in the near term. A better guess would be $75 to $85 per barrel for 12 month average price and perhaps $65 to $95/b for monthly average prices (90% confidence interval for my subjective guess).
Also the last period where real Brent prices in 2024$ were under $70/b for average monthly price consistently (2 months or more) was Feb 2020 to Jan 2021. In addition the real Brent average monthly price in 2024$ has been over $75/b every month since March 2021. It will be a while until we see an average Brent monthly price of $25/b or less.
Dennis,
Thanks for that. So in your view it is highly unlikely we will see a global recession.
Yea for Brent hitting $65/b is unlikely i agree with that. But WTI already hit that last week or so.
WTI is on average ~$5/b cheaper except for periods like covid where the price differentials were huge. Brent never hit negative prices. In covid the lowest point for brent was ~ $17/b but for WTI was ~ $-36. A $53 differential.
I agree the demand will come from non-OECD countries. The question is which ones ? China is in an economic slowdown it seems.
Iron Mike,
Yes in next few years I am doubtful there will be a World recession.
As nations become wealthier the rates of growth tend to slow down. China has become much wealthier than most other non-OECD nations. Much of the high rates of oil demand growth will come from South Asia, East Asia, Africa and Latin America, China is rapidly electrifying its vehicle fleet and may see demand for oil drop more rapidly than some of the OECD nations, the US is lagging far behind China on moving away from oil for land transport, perhaps this is also true of Australia and Canada.
The IMF forecast in April 2024 has China’s real GDP growth at 5.2% in 2023, 4.6% in 2024 and 4.1% in 2025, so yes China’s growth is slowing, but not near a recession if the forecast is accurate. For the World real GDP (PPP exchange rates) is expected to grow at 3.2% from 2023 to 2025 for the IMF forecast from April 2024. At market exchange rates the IMF forecasts 2.7% growth from 2023 to 2025 and falls to 2.55% by 2029.
https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024?cid=ca-com-compd-pubs_belt
In July 2024 the World Bank forecast for global growth was 2.6% this year and 2.7% in 2025 and 2026 (these are at market exchange rates). The World Bank’s forecast using PPP exchange rates (preferred by most international economists) are 3.1% in 2024 and 3.2% in 2025 and 2026 (fairly similar to the IMF forecast).
https://openknowledge.worldbank.org/server/api/core/bitstreams/6feb9566-e973-4706-a4e1-b3b82a1a758d/content
Brent has become the World price for Oil, at one time WTI was the World price, but it is of less significance outside of the US today, so I focus on Brent.
If you look at the US EIA’s STEO for example they no longer quote a forecast for WTI, they use Brent because it is considered by the EIA to be the benchmark for World oil prices.
The growth may come from South Asia and other east Asian nations besides China.
Dennis,
I don’t believe the Chinese figures, and i take what the “experts” predict with a grain of salt. I guess being in a younger generation than you, i am more skeptical of institutions such as the world bank, IMF, EIA, OPEC, FED etc.
Fair point about Brent. Ill use that from now on as the standard.
Regarding China they have huge issues regarding their demographic and they have flooded the world with EVs which is causing lithium and other battery metals to plummet in price. A lot of miners are going bust because of the crash in prices. I don’t think they will continue flooding the world with EVs because there is a slowdown in their take up. For e.g. in Australia there is a huge number of EVs just sitting on the ports. No one is buying them.
I think a global recession in 2025 is 25% and 2026 50%. But yea its only a guess based on nothing really.
Iron Mike,
You maybe right, sometimes big institutions get their forecasts wrong as in 2008/2009. Generally they do pretty well, I have been following this pretty closely for 40 years, but have been wrong often, this could be one of those times.
Time will tell.
Iron Mike,
I found this article on China’s economic outlook which offers a balanced perspective imo.
https://www.brookings.edu/articles/peak-china-why-do-chinas-growth-projections-differ-so-much/
Betaloo article:
https://www.skynews.com.au/australia-news/politics/nt-betaloo-basin-has-enough-gas-to-supply-australia-for-the-next-400-years-company-about-to-start-drilling-the-region-says/news-story/cb2b29ed24e43decde8dd7fea3c9ed53
I think the PIONEER guy Scott Sheffield’s son has targeted the BEETALOO for his next project.
Makes sense, they got the tech and skills.
You gotta admit BEETALOO is a great name.
Just watch out for the Saltwater Crocs and Snakes when you are dumping your frac’ing water.
They are aggressive and will stalk humans.
No worries mate! If you’re dumping frac water on or near them, they will all be dead soon enough.
Personally I’d be rooting for the crocs.
Would love to hear any oil experts on the OIL potential of the BEETALOO?
@Got2Surf:
Yes, climate change is a huge political topic in Australia.
We talk about it, talk about it, and then continue to export fossil fuels.
You are a solar panel guy if I remember? An Ideal lifestyle for a surfer..wink wink
You should come surf Australia? Great hard chargers over here!
Kelly Slater (great USA surf champion)…loved it over here.