OIL PRODUCTION UPDOWN
Non-OPEC crude oil and other liquids production grows by 1.2 million barrels per day (b/d) in 2015, and then declines by 0.4 million b/d in 2016, which would be the first annual decline in non-OPEC production since 2008. The shift in expectation from non-OPEC production growth to declines in 2016 is mostly because of declines in U.S. onshore and North Sea production (Figure 1). Non-OPEC production growth in 2015 is largely attributable to investments committed to projects before the oil price decline that began in mid-2014. Redirection of investment away from exploration towards currently producing fields has also helped maintain or increase production levels in other non-OPEC countries. This strategy has helped maintain production levels in the short term, but it will likely result in lower future production in areas that depend on continued exploration successes for output growth.
U.S. production averaged 9.4 million b/d through the first nine months of 2015. This level is 0.1 million b/d higher than the average production during the fourth quarter of 2014, despite a more than 60% decline in the total U.S. oil-directed rig count since October 2014. However, monthly crude oil production started to decrease in the second quarter of 2015. Lower 48 onshore output began declining in April 2015, and has fallen from 7.6 million b/d in March to an estimated 7.1 million b/d in November. Total U.S. crude oil production began declining in May 2015, and has fallen from 9.6 million b/d in April to an estimated 9.2 million b/d in November.
U.S. crude oil production declines to continue through September 2016, when total production is forecast to average 8.5 million b/d. This level of production would be 1.1 million b/d less than the 2015 peak reached in April. Forecast production begins increasing in late 2016, returning to an average of 8.7 million b/d in the fourth quarter. Expected crude oil production declines through September 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico. Reductions in 2015 cash flows and capital expenditures have prompted companies to defer or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays.
OPEC crude oil and other liquids production to increase by 1.1 million b/d in 2015, led by production increases in Iraq. Forecast OPEC crude oil and other liquids production increases by 0.6 million b/d in 2016, with Iran expected to increase production once international sanctions targeting its oil sector are suspended. At its December 4 meeting, OPEC members announced they "should continue to closely monitor developments in the coming months." This indicates OPEC producers, led by Saudi Arabia, are continuing the policy of defending market share in a low oil price environment.
Global consumption of petroleum and other liquids to grow by 1.4 million b/d in both 2015 and 2016. Projected real gross domestic product (GDP) for the world weighted by oil consumption, which increased by 2.7% in 2014, is expected to rise by 2.3% in 2015 and by 2.6% in 2016. Despite continuing demand growth and slowing supply growth, global petroleum and other liquids production continues to outpace consumption, leading to inventory expansion throughout the forecast period (Figure 2).
Global oil inventory builds in the third quarter of 2015 averaged 1.8 million b/d, down from 2.0 million b/d in the second quarter, which had the highest level of inventory builds since the fourth quarter of 2008. The pace of inventory builds is expected to slow in the fourth quarter to roughly 1.4 million b/d. In 2016, inventory builds are expected to slow further to an average of 0.6 million b/d.
The current average price forecast for Brent crude oil in 2016 is associated with a further reduction in the outlook for supply growth that in turn reduces the surplus of supply over consumption. EIA estimates average North Sea Brent crude oil prices of $53/barrel (b) in 2015 and $56/b in 2016. The 2015 price forecast is $1/b lower than in last month's forecast and the 2016 estimate is unchanged. Forecast West Texas Intermediate (WTI) crude oil prices average $4/b lower than the Brent price in 2015 and $5/b lower in 2016. Current values of futures and options contracts continue to suggest high uncertainty in the price outlook.
Based on contracts traded during the five-day period ending December 3, the lower and upper limits of the 95% confidence interval for the market's expectation of monthly average WTI prices are estimated at $30/b and $63/b for March 2016, widening to $26/b and $90/b for December 2016 (Figure 3). Key market uncertainties include the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.
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WNA - Apart from adding capacity, utilisation of existing plants has improved markedly since 2000. In the 1990s capacity factors averaged around 60%, but they have steadily improved since and in 2010, 2011 and 2014 were above 81%. Balakovo was the best plant in 2011 with 92.5%, and again in 2014 with 85.1%.
WNA - India has a flourishing and largely indigenous nuclear power programme and expects to have 14.6 GWe nuclear capacity on line by 2024 and 63 GWe by 2032. It aims to supply 25% of electricity from nuclear power by 2050.
WNA - Mainland China has 38 nuclear power reactors in operation, about 20 under construction, and more about to start construction. The reactors under construction include some of the world's most advanced, to give a 70% increase of nuclear capacity to 58 GWe by 2020-21. Plans are for up to 150 GWe by 2030, and much more by 2050.
PLATTS - "The domestic uranium mining industry needs US government assistance to survive the foreign onslaught -- particularly from Russia and Kazakhstan -- that has undermined the US uranium industry while new players -- particularly China -- will soon make the situation worse," Energy Fuels and Ur-Energy said in a petition they jointly filed with the department.