Weekly Oil Price ReviewViewBrent and WTI had a volatile week with small gains over the first four days of trading, and started on diverging paths on Monday as the European benchmark crude dropped $0.46/bbl on the back of weak Chinese economic data and WTI rose $0.65/bbl, recovering by more than $2/bbl after falling to $90.43 last week, a 16-month low. The spread between both fell to $3.73, the lowest since April. Crude futures jumped on Tuesday as trading in Brent futures shifted to the November front-month contract, and traders started to see potential for a bottomed out market. Brent kept steady on Wednesday and held on to most of the previous session’s gains, whilst WTI fell on disappointing EIA data. Finally, both crudes lost more than a dollar on Thursday as the glut of oil in the Atlantic Basin reflected in rising crude inventories in the U.S. and a stronger dollar put downward pressure on prices. Overall between Monday and Thursday, Brent rose from $97.11 to $97.70/bbl and WTI rose from $92.27 to $93.07/bbl.
Russia keeps unconventional aim highViewDespite Western sanctions, Energy Minister Alexander Novak announced on Tuesday that Russian production should not suffer from any “substantial changes” and is not changing its plans to develop hard-to-extract oil. As the world’s largest producer, Russian output currently stands at 10.5 million bpd, the majority of which is extracted from conventional fields in western Siberia which are depleting. Novak said that Russia expects to produce up to 1.6 million bpd of unconventional oil by 2030, or 80 million tons.
North Dakota’s oil production hits all-time high in July.ViewAccording to the North Dakota Department of Mineral Resources, the staggering investments made in the recent years to develop the Bakken and Three Forks shale fields have brought daily production to a new record of 1.1 million bpd, or 34.4 million barrels in July, up from 32.8 million barrels in June. However, the numbers were lower than expected as producers struggled to meet stringent flaring-reduction targets.
Saudi Arabia plans cut backs in oil outputViewAccording to a monthly report released last Wednesday by the OPEC, the demand for OPEC crude is likely to be lower than expected, and top exporter Saudi Arabia has announced it reduced oil output in August by over 400,000 bpd in an effort to keep prices above $100/bbl. Saudi Arabia produced 9.597 million bpd in August, down from 10.005 million in July, which is considered by analysts as a drop in exports even though domestic demand could have been lower on air conditioning declines of late summer.
Brazil sets five million bpd production target for 2023.ViewBrazil hopes to boost domestic oil and gas output from its current 2 million bpd to a sizeable 5 million bpd in 2023, on the back of an expected $550 billion investment in upstream oil and gas exploration over the next ten years according to the government’s energy research company EPE. Brazilian domestic demand is expected to top 3.5 million bpd in 2023, leading to 1.5 million bpd of exports.
The U.S. ramps up crude production forecasts for 2015.ViewAccording to the latest monthly short-term outlook published the EIA, U.S. domestic crude oil output should grow by one million bpd for a third consecutive year, reaching 9.53 million bpd in 2015, which is above last month’s forecast of 800,000 bpd. This figure would suggest that U.S. growth will contribute 91% of the rise in global oil production for 2015, which reflects the staggering shift in global supply as the U.S. shale boom has allowed domestic producers to unlock billions of barrels of reserves. Production averaged 8.6 million bpd in August, the highest since July 1986, and is on course to average 8.53 million bpd during 2014, higher than the previous EIA estimate of 8.46 million bpd.
Chinese crude imports jump in AugustViewAccording to data from the country’s official customs, Chinese imports of crude oil reached 5.96 million bpd in August, which represents a 17.5 percent boost year-on-year. Imports were up 330,000 bpd from unusually low levels of 5.63 million bpd in July, where imports had fell year-on-year for the first time in nine months.
Russian crude production set to fall in 2015ViewAccording to the Energy Ministry, Russian oil output may dip slightly next year from 525.3 to 525 million tonnes (or 10.54 million bpd) following five straight years of increases. Crude oil production last year topped 523.5 million tonnes, steadily rising since 2009 after a small 0.6 percent drop in 2008 due to the financial crisis. The European and United States sanctions are expected to reduce investments in new projects over the coming year which could affect production, although the Energy Ministry expects production growth to return in 2017, when output is seen at 562 million tonnes.
Weekly Oil Price ReviewViewBrent crude prices started the week with a fall on Monday as disappointing manufacturing data in Europe and China came at a time of ample global supply, and WTI slipped $0.10/bbl although trading was closed for Labour Day holiday. Both crude futures dropped heavily on Tuesday, as markets appeared to focus more on the possibility of weak future demand rather than worry about supply disruptions. Wednesday saw a rebound in prices, cancelling out the large downward movement of Tuesday. Brent and WTI gained $2.43/bbl and $2.65/bbl respectively, confusing analysts as there was no clear factor behind the gains. Finally, Thursday pushed Brent back down below $102/bbl, continuing the saga of up and down movements for the European benchmark, and WTI contract fell $1.09/bbl. Overall between Monday and Thursday, Brent fell from $103.19 to $101.83/bbl, and WTI fell $95.96 to $94.45/bbl.
Drop in Saudi Arabian crude shipments to U.S.ViewThe U.S. shale revolution is slowly taking its toll on U.S imports of Saudi crude, as Arab Light crude is now trading at a $0.50/bbl discount to Light Louisiana Sweet, the lowest since 1991, and imports from the MEG dropped to 878,000 bpd in August, the lowest since 2009. Industry experts expect Saudi Arabia to concentrate on eastern sales rather than competing with domestic U.S crude, and that Saudi producers will not sell their crude at a disadvantage just to keep market share, given the attractiveness of the Asian market.