A woman touches a bull statue on display outside a bank in Beijing, Monday, May 6, 2019. Shares and oil prices have tumbled after President Donald Trump jolted markets with a threat to raise more tariffs on imports from China, spooking investors who had been expecting good news this week on trade. (AP Photo/Andy Wong)
ASSOCIATED PRESS
First off, a special thanks to BP who puts out the best historical data we have access to, in its annual Statistical Review of World Energy released since 1951.
I made a couple of key graphics from its June 2019 edition.
Lifting us past the world’s two petroleum giants Russia and Saudi Arabia, the U.S. shale oil boom since 2008 has been the top energy story in the world.
Since 2008, U.S. oil output has increased 130%, compared to 15% for Russia and 15% for Saudi Arabia
In July, OPEC and allied major oil producers led by Russia agreed to extend 1.2 million b/d of crude output cuts for nine months, and they will probably have to go beyond that.
OPEC’s share of global supply was at 30% in July, with members at 163% compliance of the agreement.
Saudi Arabia alone produced 700,000 b/d less than its allowed level.
This is making U.S. shale supply even more critical.
We are at the heart of a non-OPEC supply boom, up 1.4 million b/d year-over-year in July.
IEA expects 1.9 million b/d non-OPEC supply growth in 2019 and 2.2 million b/d in 2020.
This explains why many have become bearish for oil prices since it would likely easily cover new demand.
Now, with industry consolidation and more pipelines coming to the Permian (e.g., the 900,000 b/d Gray Oak is expected to start up by the end of this year), the U.S. could be responsible for over 80% of new global production over the next five years, with even more coming after that.
The breakeven oil price in the world’s largest oil field is reported at $37 per barrel.
The U.S. has surpassed Russia and Saudi Arabia to easily be the largest oil producer.
Data source: BP; JTC
With the worsening China-U.S. trade row, expected new oil demand has been the focus for the market.
With much uncertainty out there, things have been trending bearish.
In its latest Oil Market Report released on August 9, IEA cut its global crude oil demand forecasts for 2019 and 2020 by 8.3% and by 3.7%.
IEA lowered its 2019 forecast by 100,000 barrels per day to 1.1 million b/d and reduced its 2020 demand growth by 50,000 b/d to 1.3 million b/d.
For comparison, since 2000, new yearly global oil demand has been at 1.25 million b/d, although it has been much higher at 1.56 million b/d since 2010.
New oil demand falling is not as much as a structural change as it is a byproduct of a slowing global economy.
And to be clear, lower demand growth is not the absolute reduction in demand that some claim.
For example, a resolution to the trade war, and for sure one is eventually coming, will brighten the economic outlook and reinstall oil demand growth to normal or above levels.
Although it varies by year, new global oil demand remains very strong.
Data source: BP; JTC
Together, Saudi Arabia, Russia, and the U.S. account for 35% of all oil exports.
The U.S. could soon become the largest oil exporter in the world, an unimaginable development just five years ago.
While the U.S. still imports a lot of oil, we have replaced OPEC with a good friend, neighbor, and democratic supplier: “Venezuela’s U.S. Oil Loss Is Canada’s Gain.”
IEA reports that of the 600,000 b/d of new oil demand in the first half of this year, China accounted for 500,000 b/d.
This boom from China is even more amazing, since: “China’s Economy Falters; Slowest Growth In Nearly 3 Decades.”
Longer-term, with such a flourishing population base (e.g., 370 million kids age 14 or younger) India is expected to become the main new demand and import market: “India’s July petrol imports highest in at least eight years: oil ministry.”
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China has surpassed the U.S. to be 1st in oil imports, with India passing Japan to be 3rd place.
Data source: BP; JTC
