Time is running out to reduce stockpiles in 2017, Statoil says
Crude exports have remained above a million barrels a day for four months, a monthly level only reached once before back in 2010, according to the most recent data. in the so-called pre-salt region, discovered a decade ago, are now driving growth. And the oil is more valuable than what Brazil has historically produced at fields closer to shore where the sulphur content is higher, the company said.
Crude exports have remained above a million barrels a day for four months, a monthly level only reached once before back in 2010, according to the most recent data from the National Petroleum Agency, or ANP.
The growth in US shale, Brazilian pre-salt, and Canadian oil sands essentially blunts the impact of Opec’s output cuts, which have been extended through next March. The International Energy Agency expects non-Opec countries including the US and Brazil to raise output by 1.5 million barrels a day next year, lifting global supply above demand.
“Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” IEA said in its June 14 report.
The oil market is running out of time for crude inventories to show a significant drop in 2017, according to Statoil’s chief economist.
When it comes, though, the correction “will be relatively rapid,” said Eirik Waerness in an interview at Bloomberg headquarters in New York.
Analysts have been surprised by the intransigence of global oil stockpiles, according to Waerness. That’s because the focus has been mostly on US shale, missing the “flow of oil from projects that were decided back in 2010” and now are coming online. Production is even increasing in the North Sea, where analysts expected a decline, he said.
This makes it more difficult for Opec to increase prices, according to Waerness.
“At some point, impact from an ebbing flow of projects will slow down,” he said. “Patience is the name of the game. Current prices are unsustainably low. Producers are not making enough to cover production cost.”
Decline
West Texas Intermediate, the US benchmark, closed at $43.01 a barrel on Friday. Prices in New York have declined 19.8 per cent this year, dropping more than 20 per cent below the 2017 high on Wednesday to slip into a bear market amid an ongoing supply glut. Drillers added rigs to the shale patch for a record 23rd straight week, according to Baker Hughes Inc data reported on Friday.
Unlike the International Energy Agency, Statoil expects oil demand to peak in 2030 under its central scenario. That is too late to meet the temperature target outlined in the Paris Climate agreement. “Peak oil has to happen extremely rapidly, by 2022, or we won’t reach that target,” said Waerness.