USOI - OPEC Update June 2023
2023-06-19 02:49:00 ET
Summary
- OPEC crude output was revised lower in April 2023 by 74 kb/d compared to last month’s report and March 2023 OPEC crude output was revised lower by 21 kb/d.
- Preliminary data indicates that global liquids production in May decreased by 1.02 mb/d to average 100.2 mb/d compared with the previous month.
- The call on OPEC for 2023 has risen by 40 kb from last month’s OPEC estimate due to a reduced estimate for non-OPEC liquids output plus OPEC NGL and non-conventional output and an increase in the estimate for oil demand in 2023.
A guest post by D Coyne
The OPEC Monthly Oil Market Report (MOMR) for June 2023 was published recently. The last month reported in most of the OPEC charts that follow is May 2023 and output reported for OPEC nations is crude oil output in thousands of barrels per day (kb/d). In many of the OPEC charts that follow the blue line with markers is monthly output and the thin red line is the centered twelve-month average (CTMA) output.
Figure 1 Figure 2
OPEC crude output was revised lower in April 2023 by 74 kb/d compared to last month’s report and March 2023 OPEC crude output was revised lower by 21 kb/d. When the World was at its CTMA peak for C+C output in 2018, OPEC crude output was about 31300 kb/d, and by April 2023, OPEC crude output had fallen to roughly 3240 kb/d below that 2018 average level.
Figure 3
Preliminary data indicates that global liquids production in May decreased by 1.02 mb/d to average 100.2 mb/d compared with the previous month.
Figure 4
OECD stocks increased in April 2023 by 30.2 Mb and were 74 Mb below the 5-year average. Through April 2023 the World oil market looks fairly balanced with OECD stocks slowly rising. Looking at OPEC’s estimates for future supply and demand and considering recent OPEC quotas, it looks like the World oil market will be tight the second half of 2023, see figures 5 and 6 below.
Figure 5 Figure 6
The call on OPEC for 2023 has risen by 40 kb from last month’s OPEC estimate due to a reduced estimate for non-OPEC liquids output plus OPEC NGL and non-conventional output and an increase in the estimate for oil demand in 2023. We have avoided a default on US Treasury Securities, and assuming no major changes in the Ukrainian War or increased tensions between the US and China, we might avoid a severe recession. This rosy scenario also assumes that central bankers don’t overdo the fight against inflation, which could be incorrect. If OPEC continues with cuts as currently planned and if OPEC supply and demand estimates are roughly correct, oil prices should rise by the middle of 2023Q3 (only 8 weeks away).
Figure 7
OPEC has increased its estimate for US tight oil in 2023 by 20 kb/d from last month. This breaks down to a 10 kb/d increase for the Permian basin compared to last month, a 20 kb/d increase in Bakken shale output from last month, and a 10 kb/d decrease in Eagle Ford output in 2023 compared to last month’s estimate. My estimate for the US tight oil increase in 2023 is 640 kb/d, about 70 kb/d less than OPEC’s estimate.
Figure 8
The Hubbert model above is based on a Hubbert linearization on OPEC data from 2000 to 2019, cumulative output through 2022 for the model match the data well through 2022 (model cumulative is 595 Gb at the end of 2022 vs. 592 Gb for the data). The terminal decline rate for the model is about 4.1% per year, but the model does not reach this level of decline until 2146, the decline rate is zero in 2022 and gradually increases over time (1%/y in 2035, 2% in 2049, 3% in 2068, and 4% in 2129.) Hubbert linearization in chart below. For figure 9 below, the horizontal axis is cumulative output in Gb and the vertical axis is annual production divided by cumulative production. URR=-b/m for f(x)=mx+b on chart below.
Figure 9
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
OPEC Update, June 2023