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Oil Supplies at 83 Month Low, Demand at Record High

Summary:
Total supplies at an 83 month low; total demand at a record high; distillates demand at 18+ year high; global shortage at 1,210,000 bpd, Focus On Fracking, RJS Strategic Petroleum Reserve approaching a 19 year low; oil + products supplies drop to an 83 month low; total oil product demand sets a record high, led by distillates demand at 18+ year high; global oil shortage at 1,210,000 barrels per day in November as OPEC output falls 563,000 barrels per day short of quota; demand revisions now indicate oil shortage for all of 2021 i sent you what i have on the weekly US petroleum status report yesterday evening when i had it done….i’ll include my coverage of the global oil supply & demand data from the monthly OPEC report below…my suggested

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Total supplies at an 83 month low; total demand at a record high; distillates demand at 18+ year high; global shortage at 1,210,000 bpd, Focus On Fracking, RJS

Strategic Petroleum Reserve approaching a 19 year low; oil + products supplies drop to an 83 month low; total oil product demand sets a record high, led by distillates demand at 18+ year high; global oil shortage at 1,210,000 barrels per day in November as OPEC output falls 563,000 barrels per day short of quota; demand revisions now indicate oil shortage for all of 2021

i sent you what i have on the weekly US petroleum status report yesterday evening when i had it done….i’ll include my coverage of the global oil supply & demand data from the monthly OPEC report below…my suggested headline here can be shortened..

Global oil shortage at 1,210,000 barrels per day in November as OPEC output falls 563,000 barrels per day short of quota; demand revisions now indicate oil shortage for all of 2021

OPEC’s December Oil Market Report

Monday of this week saw the release of OPEC’s December Oil Market Report, which includes OPEC & global oil data for November, and hence it gives us a picture of the global oil supply & demand situation for the fourth month after ‘OPEC+’ agreed to increase their output by 400,000 barrels per day monthly from the previously agreed to July level, which was part of the fifth production quota policy reset that they’ve made over the past year and a half, all in response to the pandemic-related slowdown and subsequent irregular recovery…again, we’ll caution that the oil demand estimates made by OPEC herein, while the course of the Covid-19 pandemic still remains uncertain in most countries around the globe, should be considered as having a much larger margin of error than we’d expect from this report during stable and hence more predictable periods.. 

the first table from this monthly report that we’ll review is from the page numbered 47 of this month’s report (pdf page 59), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures… 

As we can see on the bottom line of the above table, OPEC’s oil output increased by 285,000 barrels per day to 27,717,000 barrels per day during November, up from their revised October production total averaging 27,432,000 barrels per day….however, that October output figure was originally reported as 27,453,000 barrels per day, which therefore means that OPEC’s October production was revised 21,000 barrels per day lower with this report, and hence OPEC’s November production was, in effect, a 264,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official October OPEC output figures as reported a month ago, before this month’s revision)… 

According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day each month through November, which would include an increase of 254,000 barrels per day from the OPEC members listed above…so as we can see from the above table, OPEC’s increase of 285,000 barrels per day was a bit more than that…however, since OPEC’s production was already 588,000 barrels per day short of their quota in October, the 31,000 extra barrels per day they produced in November is pretty inconsequential, especially since those OPEC members who saw larger than allotted increases in November were already lagging their quotas.. 

Recall that last year’s original oil producer’s agreement was to cut oil production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June of last year, but the initial 9.7 million bpd production cut agreement had been extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020….then, in a subsequent meeting in July of last year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August 2020 and subsequent months, which thus became the agreement that governed OPEC’s output for the rest of 2020…the OPEC+ agreement for this January’s production, which was later extended to include February and March and then April’s output, was to further ease their supply cuts by 500,000 barrels per day to a cut of 7.2 million barrels per day from that original baseline…then, during a difficult meeting on April 1st of this yearOPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month by a set amount over the next three months, taking their joint output cut agreement through July….production levels for August and the following months of this year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over reference production levels, and a subsequent attempt to restart that meeting on July 5th was called off….so it wasn’t until July 18th that a tentative compromise addressing August quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August and again by that amount in each of the following months, and boosting reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022…OPEC and other producers then agreed to increase their production in January 2022 by a further incremental 400,000 barrels per day in a meeting concluded on the 2nd of December, two weeks ago… 

OPEC arrived at the production quotas for August through November of this year by repeatedly adjusting the original 23%, or 9.7 million barrel per day production cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day output reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was actually raised to an 8.2 million barrel per day oil output reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during February, Marchand then later during April of this year….under the prior agreement, OPEC’s production cut in April was at 4,564,000 barrels per day from the October 2018 baseline, which was lowered to a cut of 3,650,000 barrels per day from the baseline with the latest comprehensive agreement, which thus set the July production quota for the “OPEC 10” at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by this agreement….for OPEC and the other producers to increase their output by 400,000 barrels per day from that July level, each producer would be allowed to increase their production by just over 1% per month…for the ten members of OPEC who agreed to impose cuts on themselves, that would mean their August output quota would be roughly 23,277,000 barrels per day, then 23,531,000 barrels per day in September, then roughly 23,786,000 barrels per day in October, and then 24,041,000 barrels per day in November….therefore, the 23,478,000 barrels those 10 OPEC members produced in November were still 563,000 barrels per day short of what they were expected to produce, with Nigeria, Angola and the Saudis accounting for the most of this month’s shortfall.. 

The next graphic from this month’s report that we’ll highlight has the months mislabelled, but it still correctly shows us both OPEC’s and worldwide oil production monthly on the same graph, over the period from December 2019 to November 2021, and it comes from page 48 (pdf page 60) of OPEC’s December Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC’s monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale…. 

Including this month’s 285,000 barrel per day increase in OPEC’s production from their revised production of a month earlier, OPEC’s preliminary estimate indicates that total global liquids production increased by a rounded 880,000 barrels per day to average 98.28 million barrels per day in November, a reported increase which came after October’s total global output figure was apparently revised down by 160,000 barrels per day from the 97.56 million barrels per day of global oil output that was estimated for October a month ago, as non-OPEC oil production rose by a rounded 590,000 barrels per day in November after that revision, with most the increase coming from non-OECD countries, predominantly in Latin America, even as European OECD countries increased their output by 90,000 barrels per day… 

After that increase in November’s global output, the 98.28 million barrels of oil per day that were produced globally during the month were 5.93 million barrels per day, or 6.4% more than the revised 92.35 million barrels of oil per day that were being produced globally in November a year ago, which was the fourth month after OPEC and other producers agreed to reduce their output cuts from 9.7 million barrels per day to 7.7 million barrels per day (see the December 2020 OPEC report (online pdf) for the originally reported November 2020 details)…with this month’s increase in OPEC’s output, their November oil production of 27,717,000 barrels per day amounted to 28.2% of what was produced globally during the month, unchanged from their share of the global total in October….OPEC’s November 2020 production was reported at 25,109,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,608,000 barrels per day, or 10.4% more barrels per day of oil this November than what they produced a year earlier, when they accounted for 27.1% of global output… 

Even after the increases in OPEC’s and global oil output that we’ve seen in this report, the amount of oil being produced globally during the month again fell short of the expected global demand, as this next table from the OPEC report will show us.. 

The above table came from page 25 of the OPEC December Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and then OPEC’s estimate of oil demand by region and globally, quarterly over 2021 over the rest of the table…on the “Total world” line in the fifth column, we’ve circled in blue the figure that’s relevant for November, which is their estimate of global oil demand during the fourth quarter of 2021… OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe have been using an average of 99.49 million barrels of oil per day, which was unrevised from their estimate for the 4th quarter a month ago, still reflecting a bit of coronavirus related demand destruction compared to 2019, when global demand averaged over 101 million barrels per day during second half of the year….but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were only producing 98.28 million barrels per day during November, which would imply that there was a shortage of around 1,210,000 barrels per day in global oil production in November when compared to the demand estimated for the month… 

in addition to figuring that November oil shortage implied by this report, the downward revision of 160,000 barrels per day to October’s global oil output that’s implied in this report means that the 1,930,000 barrels per day global oil output shortage we had previously figured for October would now be revised to an oil shortage of 2,090,000 barrels per day…. 

Note on the table above that we’ve circled in green a downward revision of 230,000 barrels per day to the third quarter’s demand….that means that the 2,070,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 1,840,000 barrels per day….in like manner, 230,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 2,580,000 barrels per day we had previously figured for August would now be revised to a shortage of 2,350,000 barrels per day, and that the shortage of 2,160,000 barrels per day barrels per day we had previously figured for July would have to be revised to a shortage of 1,930,000 barrels per day… 

On the other hand, you can see in green that we’ve also circled a modest upward revision of 60,000 barrels per day to the second quarter’s demand, a quarter when there was also a shortage of oil being produced globally…. based on that upward revision to demand, our previous estimate that there was a shortage of 680,000 barrels per day in June would now be revised to a 740,000 barrels per day shortage, the oil shortage of 2,010,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 2.070,000 barrels per day, and that the 2,360,000 barrels per day global oil output shortage we should have figured for April would have to be revised to a shortage of 2,420,000 barrels per day… 

Also note that in green that we have circled a significant upward revision of 950,000 barrels per day to OPEC’s previous estimate of first quarter demand, during a period when supply and demand seemed to be closer to being in balance….for March, that means that the global oil output surplus of 140,000 barrels per day we had previously figured for March would now be revised to a shortage of 810,000 barrels per day… similarly, the upward revision to first quarter demand means that the 870,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 1,820,000 barrels per day, and that the global oil output surplus of 350,000 barrels per day we had previously figured for January would now be revised to a shortage of 600,000 barrels per day, in light of that 950,000 barrel per day upward revision to first quarter demand… 

You might also note that we have also circled a 190,000 barrel per day upward revision to 2020’s demand circled in orange….while we’re not inclined to go back and recompute the figures for each month of last year in light of that revision, suffice it to say that the quantities of oil being produced globally during the pandemic of 2020 averaged over 3 million barrels per day more than anyone wanted, and that an average 190,000 barrels per day upward revision to global demand during that period would be a drop in the bucket in comparison… 

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