The oil market continues to wind itself through a period of oversupply and battles over global market share, with no short-term solution apparently in sight. Few analysts see an imminent sectorwide upstream recovery, and operators and the service sector seem to agree. The ramifications of the steep drop in prices since last year continue to make almost daily headlines.
- Crude oil production in the United States rose 9,000 B/D to 9.7 million bbl a day in April, the highest since May 1971, according to monthly data from the US Energy Information Administration (EIA). The slight increase in April from the previous month could indicate the US production is finally bottoming out, although in July, after 29 consecutive weeks of rig count declines, the US posted a slight gain in rig count, according to Baker Hughes’ weekly rig census. The latest version of BP’s annual Statistical Review of World Energy, released in June, said US oil production grew by 1.6 million B/D last year, becoming the first country to increase output by at least 1 million B/D for 3 years in a row.
- OPEC production continues to climb. Iraqi oil production rose to a record in June, and OPEC output reached its highest level since August 2012. Iraqi production rose by 567,000 B/D. Meanwhile, Saudi Arabia reported that it increased oil production to a record 10.56 million B/D in June, beating its previous record set in 1980. Overall, OPEC member output rose by 283,200 B/D to a 3-year high in June to 31.38 million B/D, according to a Bloomberg survey.
- US exploration and production (E&P) companies witnessed a nearly 20% decline in oilfield drilling costs from June 2014 to May 2015. The EIA said that lower rates from drilling service companies were caused by “downward pressure” on E&P capital expenditures.
- For the first time since 2011, global E&P capital expenditures will drop below USD 600 billion this year, a fall of 20.2%, according to an Evercore ISI survey. The survey predicted that that number could increase next year if oil becomes stable at USD 65 to USD 70 per bbl.
- Deepwater oil projects and gas facilities worth around USD 200 billion have been canceled or postponed this year because of the drop in prices, according to a new report issued by Ernst & Young last month. The consultancy expects the industry to make additional project cuts and delays as the industry anticipates a long period of lower oil prices.
- New data underscores why Saudi Arabia feared losing its global market share to other producers such as the US. Trade data show that Saudi Arabia last year was losing its market share to the US as well as to Iraq, Russia, and Iran in its sales to Asia in the second half of last year, according to Energy Intelligence. Saudi Arabia’s share of exports among the 20 largest crude sellers declined by 750,000 B/D in the second half of last year compared with the same period in 2013. Two-thirds of the drop came in a decline in Saudi sales to the US, while the rest came from losses in sales to China, India, Japan, South Korea, Taiwan, Thailand, and Singapore. Russia is now the third-largest crude oil supplier to China, with exports totaling 700,000 B/D in the second half of last year, an increase of 47% from year-earlier levels, according to Energy Intelligence. OPEC said its share of the global crude oil market last year declined to the lowest level since 2003.
