OILX - OPEC Update November 18 2023

2023-11-21 00:29:00 ET

Summary

• OPEC crude output was revised higher in September 2023 by 65 kb/d compared to last month’s report and August 2023 OPEC crude output was revised higher by 19 kb/d.
• Preliminary data indicates that global liquids production in October increased by 0.3 mb/d to average 101.6 mb/d compared with the previous month.
• At the World level, based on OPEC and EIA estimates of World Supply and Demand, the World oil market is currently fairly balanced.

A guest post by D Coyne

The OPEC Monthly Oil Market Report ((MOMR)) for November 2023 was published recently. The last month reported in most of the OPEC charts that follow is October 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 the monthly output and the thin red line is the centered twelve-month average ((CTMA)) output.

OPEC crude output was revised higher in September 2023 by 65 kb/d compared to last month’s report and in August 2023 OPEC crude output was revised higher by 19 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 October 2023 OPEC, crude output had fallen to roughly 3400 kb/d below the OPEC output at the World C+C CTMA peak in 2018.

Preliminary data indicates that global liquids production in October increased by 0.3 mb/d to average 101.6 mb/d compared with the previous month. World liquids output increased about 3 Mb/d in the past 23 months (from 98.6 Mb/d in November 2021).

Preliminary September 2023 data show total OECD commercial oil stocks down by 15.6 mb, m-o-m. At 2,783 mb, they were 33 mb higher than the same time one year ago, but 118 mb lower than the latest five-year average and 184 mb below the 2015-2019 average. In September, I thought that if OECD stocks came close to the bottom of the 5-year range, we might see oil prices spike, so far, it seems I was wrong as oil prices remain subdued due to fears of falling oil demand. At the World level, based on OPEC and EIA estimates of World Supply and Demand, the World oil market is currently fairly balanced. So, from that perspective, the OECD stock level may not be as important as in the past. Future oil demand growth may come from India, China, and other non-OECD nations.

If OPEC continues to produce at the recent October level of 27.9 Mb/d for both November and December and the OPEC estimates for non-OPEC Supply and OPEC non-crude Supply and World liquids demand are correct, we may see around 270 million barrels drawn from World petroleum stocks in 4Q24. OPEC still believes there are significant levels of World petroleum stocks that need to be reduced and may continue with their cuts in crude output. They may wait for higher oil prices, perhaps $95/b or more, before increasing output.

The chart above takes data from the most recent EIA STEO and compares it with the most recent MOMR from OPEC. There is a significant difference in the future estimates of Oil Supply and Demand between the EIA and OPEC. It looks like the EIA thinks OPEC has supply about right and OPEC may be using EIA estimates to guide their output rather than the MOMR estimates.

My estimate for 2022 is 7.9 Mb/d for US tight and 4.68 Mb/d for Permian output. In 2023, my guess is 8.4 Mb/d for US tight and 5.22 Mb/d for Permian (increases of 0.5 Mb/d and 0.54 Mb/d respectively). In 2024, I expect US tight oil to increase to 8.71 Mb/d (0.31 Mb/d increase) and Permian output to average 5.58 Mb/d (a 0.36 Mb/d increase).

OPEC cites Rystad estimates of about 505 wells being fracked in the Permian basin in August 2023, and in September, preliminary data suggests 462 wells were fracked in the Permian basin. These are about half of all wells fracked in August (1089) and September (1007) in the US.

The chart above compares the initial EIA 914 estimate for Texas with statewide RRC data, over Jan 2015 to August 2022 period (curves diverge in Sept 2022). The EIA 914 Texas C+C estimate is about 99.9% of the statewide RRC C+C estimate (on average the EIA estimate is slightly low).

The ratios in the chart above will be used to get a corrected estimate for Texas Permian output for Sept 2022 to August 2023. First I get RRC data from all 50 Permian basin counties from Jan 2015 to August 2023 and then use these correction factors to estimate production from Sept 2022 to August 2023. I assume that the statewide ratio of EIA to RRC output applies to the Permian basin as well (this assumption may be incorrect). Note that if anyone wants to repeat this, it is easier to simply download the district 7C, 8, and 8A data, there is very little difference. See the chart below which compares the two methods for Texas Permian C+C output.

Note that DPR refers to the Drilling Productivity Report spreadsheet which lists all the Texas Permian Counties. The counties line is the sum of output from 50 Permian Basin counties in Texas and the districts line is the sum of the 3 RRC Permian districts (7C, 8, and 8A). I also downloaded state data for the 4 New Mexico Permian counties and corrected the data using the same method used for the Texas Permian data. The two data sets were combined to get a State data estimate for Permian region output which includes both tight oil and conventional oil.

Novilabs recently provided a Permian Basin Update . The data for Permian tight oil from March 2021 to December 2022 was compared with the State data for the Permian region and we took the difference to estimate Permian Basin conventional oil output.

Although there is clearly a downward trend in conventional output suggested by this data at about 40 kb/d per year, I took the average of these data points from March 2021 to December 2022 (497 kb/d) and subtracted this amount from the State data for the Permian basin to get a Permian tight oil estimate from Jan 2023 to August 2023.

The trend over this period (March 2021 to August 2023) for Permian tight oil is about 600 kb/d per year, slightly higher than the Permian region trend at 584 kb/d per year. This is due to the declining trend in conventional output over the March 2021 to August 2023 period of about 16 kb/d per year.

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