Slower Chinese oil demand growth expected in 2015ViewState-owned China National Petroleum Corp. (CNPC) has forecast China’s implied oil demand this year to rise by only 3% to reach 10.68 million bpd, compared to a growth of 3.7% in 2014. In future years, CNPC expect a more moderate oil demand growth rate of 2-3%. Despite the slowdown in appetite, CNPC expect that imports will meet 60.3% of the country’s petroleum consumption this year, compared to 59.5% last year. Overall this will translate into a 5.4% rise in China’s net crude imports to 6.49 million bpd for 2015.
Primorsk diesel exports rise, as crude exports fallViewCrude exports from Novorossiysk and Primorsk fell 20.7% in 2014, while product exports from Russian Baltic Sea ports are set to rise to new records. Export data reflected the shift of Russian crude export flows from west to the far east of the country, as exports fell to approximately 1.46 million bpd in 2014 eastern ports. However, Russian exports of diesel reached a record 1.3 million tonnes in January and are set to increase again for February loadings from Primorsk, brokers have also reported a move to 40,000 tonne tankers from 20-30,000 stems in order to lift port throughput.
Indian reliance on crude imports poised to riseViewIndia will see its reliance on oil imports intensify as domestic oil production continued to decline in 2014. India’s federal oil ministry reported that crude output fell to 753,800 bpd in 2014, a drop of 0.4% from a year earlier, while natural gas output has fallen 5.4% in 2014. Currently, close to 80% of India’s oil consumption is met through imports. The country has a total refining capacity of 4.3 million bpd, which is soon expanding with the new 300,000 bpd Paradip refinery, and is now looking to fill one of the three new strategic storage facilities, the 9.5 million barrel Visakhapatnam, by the middle of February.
US oil rig count falls to 1,317ViewBaker Hughes has reported that the number of US oil rigs fell by 49 last week, this means that the number of US oil rigs has fallen by 165 so far this month to 1317. However, data from the US Energy Information Administration (EIA) shows that the impact of the drop is mitigated by greater productivity from each rig. In their latest estimate, the EIA forecasts US crude oil output in 2015 will weaken in the middle of the year and rise again at the end, overall they estimate US crude output is set to grow by an average of 640,000 bpd in 2015.
Weekly Oil Price ReviewViewDespite minimal weekly gains last week for both WTI and Brent, the oil market resumed its downturn this week. On Monday, reports of a weakening domestic economy by the Chinese premier and a report that Iraq produced a record 4 million bpd in December, pushed both crude futures to trade down more than $1/bbl. On Tuesday, the IMF cut its forecast of global economic growth in 2015 by 0.3% to 3.5%, North Sea Brent fell $0.85/bbl and WTI by $2.30/bbl. However, in response to sustained weakening oil prices, a line-up of international oil companies have committed to lower budgets which brought about limited positive sentiment in oil markets as a sign of a reduction in future oil supply, insurgency in Yemen also provided relief;, Brent rose $1.04/bbl and WTI gained $1.31/bbl on Wednesday. The massive 10.1 million barrel build in US crude inventories, for the week ended January 19th, released by the EIA on Thursday reinforced the general consensus among major banks and reporting agencies that the fundamental weak demand and oversupply will continue to weigh on prices during the first half of 2015, WTI lost its the gains made the day before, falling $1.47/bbl, while Brent closed down $0.51/bbl. From Monday to Thursday, Brent fell from $50.17/bbl to close at $48.52/bbl and WTI traded down from $48.69/bbl to close at $46.31/bbl.
Myanmar-China pipeline to launch at the end of JanuaryViewThe 440,000 bpd China National Petroleum Corp. (CNPC) crude oil pipeline that runs from a deepsea port in Myanmar to a refinery in China’s southwestern Yunnan province is tentatively planned to launch at the end of this month. The pipeline will provide an alternative shipping route to the crowded Malacca Strait for principally Middle Eastern oil imports. However, the final destination of the pipeline, a 200,000 bpd joint venture refinery in Kunming, will be completed in October at the earliest. Until the refinery is in operation, CNPC has the option to use the 7.55 million barrels of oil storage at the port in Myanmar or further storage in a region east of the refinery.
Jump in 2014 Indian fuel consumptionViewIndia’s fuel product consumption rose 3.4% in 2014 to reach roughly 3.28 million bpd according to the country’s oil ministry. This growth level comes after a three-year low of 1.6% product consumption growth in 2013 and reinforces the belief that India is the next big emerging economy, particularly as China’s economy in 2014 grew at a relatively lacklustre 7.4% compared to 7.7% in 2013. Product consumption growth was driven by a 8.8% growth in gasoline consumption as car and two-wheeler sales boomed in the country, growth in LPG sales and growth in jet fuel consumption. India’s current total domestic refining capacity stands at 4.3 million bpd, but will be boosted by a further 300,000 bpd as the east coast Paradip refinery starts production later this year.
Vietnamese crude exports up 10.5% in 2014ViewVietnam’s crude oil exports rose by 27.4% in December, year-on-year, to reach 205,052 bpd according to Custom’s data. Compared to 2013, Vietnam exported 10.5% more crude in 2014 reaching close to 200,000 bpd. The top buyers of Vietnamese crude include Australia, Japan and China, who imported around 42,000 bpd, 37,000 bpd and 28,000 bpd respectively. However, Petrovietnam has just announced that they have plans to reduce output by about 9,000 bpd from those fields with production costs greater than $50/barrel due to the weak oil price, some of which could be in Vietnam.
IEA reduces non-OPEC 2015 supply growth forecastViewIn its latest monthly report released Friday, the International Energy Agency (IEA) reduced its non-OPEC supply growth forecast for 2015 by 350,000 bpd to 950,000 bpd. Colombia is the largest contributor to the decline, their production is estimated to fall 175,000 bpd this year, while in North America the effect of lower oil prices is minor, with Canada projected to grow 95,000 bpd less and the US 80,000 bpd less in 2015. However, the demand response to the fall in oil prices will be lagged and marginal in comparison, according to the IEA, due to weak underlying economic fundamentals offsetting demand growth potential.
Weekly Oil Price ReviewViewAfter enduring their seventh straight week of losses last week, the trend continued this week for both crude contracts. On Monday, North Sea Brent fell $2.68/bbl and which left it to close below $50/bbl for the first time since April 2009. This was spurred in part by Arab members of OPEC reiterating their position to not cut production in order to support prices and unscheduled refinery outages in the US, which led WTI to lose $2.29/bbl on Monday. Brent and WTI briefly traded at parity on Tuesday, at around $46/bbl, as the US government reported that domestic crude production will grow at its slowest rate since 2001 in 2016. On Wednesday both contracts gained more than $2/bbl in late trading, Brent rose $2.10/bbl while WTI rose $2.59/bbl. The recent strong performance of WTI relative to Brent has been traced to the greater oil demand in the US and the greater availability of domestic storage capacity, this performance comes despite the EIA reporting US commercial crude inventories to be 10% higher for the week ended January 9th than at the same time last year. There remains little consensus of the bottoming out level for either crude contract, analysts also saw no concrete reason for the gains both crudes made Wednesday and subsequently most of those gains were lost on Thursday with the Brent March contract, which takes over trading today, falling $1.59/bbl and February WTI losing $2.23/bbl. From Monday opening to Thursday, the February Brent contract fell $2.44/bbl to close at $47.67/bbl while the February WTI contract fell $2.13/bbl to settle at $46.25/bbl.