NYC-based PIRA Energy Group reports that the U.S. is now largest oil supplier in the world. On the week, continued low U.S. runs led to large product stock decline. In Japan gasoil stocks drew to a new record low. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
U.S. is Now Largest Oil Supplier in the World
2013 total liquids supply is expected to average 12.1 MMB/D in the U.S., making it the world’s largest oil producer, overtaking Saudi Arabia and Russia. Shale liquids development is the key driver of the growth, with a increase of 3.2 MMB/D over the last four years. In the history of the global oil industry only Saudi Arabia in 1970-74 raised its output faster.
Big Increase in 2014 (and 2015) Global Refinery Capacity
Despite the fact that the world currently has a surplus of refining capacity, new additions are on the way. In comparison to beginning-year 2013, world refining distillation capacity is set to increase by about 5%, or 2.6 MMB/D, by the end of this year; another 2.1 MMB/D will come online in 2014. The biggest capacity increase over the two years comes from new construction projects in China and the Middle East.
Storms Disrupt Operations
Storms and typhoons continue to track toward Japan with a fair bit of regularity, with Typhoon Danas impacting Okinawa, followed by Typhoon Wipha impacting the Tokyo area. Yet another typhoon (Francisco) is tracking toward Japan. Gasoline stocks drew modestly, while gasoil stocks drew to a new record low. The implied crude import figure was very low and this allowed crude stocks to draw. Refinery margins remain weak.
Overview of API Data
Continued low U.S. runs led to large product stock declines as forecast. Tropical Storm Karen apparently did not reduce crude imports, leading to a very large crude stock build. Cushing crude stocks build as the Basin pipeline dumped more crude into Cushing with Magellan throughput down and a narrow LLS-WTI spread attracted more rail barrels to Cushing.
Qatari Marketing Flexibility Provides Key Signals for Price Direction
Qatar has benefitted financially from placing more LNG into Asia and has managed to do so at a premium to Atlantic Basin spot prices in Asia. To date, Qatar has been able to place incremental volumes into Japan, Korea, and China at, or close to its relatively strong oil-linked prices. How much more gas Qatar can (or will) divert to Asia from Europe this winter is a key question for AB spot players, who have the most to lose if there turns out to be more “wiggle room” on the supply side than anticipated.
Ethanol Price Rebound/ RIN Values Plummet
U.S. ethanol prices increased for the first time in three weeks as production declined and inventories fell to the lowest level since the EIA began reporting weekly stock data in June 2010. Circulation of a purported draft of an EPA report setting lower biofuels mandates for 2014 sent RIN markets crashing.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
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Newfield Exploration Company (NYSE: NFX) has announced the signing of a share purchase agreement to sell all of its equity interests in Newfield Malaysia Holdings to SapuraKencana Petroleum Berhad for a total cash consideration of $898 million, which is expected to close in early 2014. The agreement is subject to the approval of Petroliam Nasional Berhad (PETRONAS) under the applicable Production Sharing Contracts, the purchaser's shareholder approval and customary closing conditions. Newfield intends to offer preferential rights to its partners under the Joint Operating Agreements. The agreement was executed after the Company undertook a thorough and rigorous bidding exercise involving over 40 companies.
"We have enjoyed significant success in Malaysia and had a great business partnership with PETRONAS in the region. In early 2013, however, we announced our intent to exit our international businesses and focus our investments on domestic resource plays," said Lee K. Boothby, Newfield Chairman, President and CEO. "Our year-to-date results build positive momentum and confidence in our ability to deliver on our three-year plan."
Newfield plans to use the proceeds from the sale of its Malaysian assets to pay down existing debt and general corporate purposes. Goldman, Sachs & Co. is acting as financial advisor on the sale of Newfield's international businesses.
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Transocean Ltd. (NYSE: RIG) will replace Dell Inc. (NASD:DELL) in the S&P 500 after the close of trading on Monday, October 28. Founder Michael Dell and Silver Lake Partners are acquiring Dell in a deal expected to be completed soon pending final conditions.
Transocean provides offshore contract drilling services for oil and gas wells. Headquartered in Zug, Switzerland, the company will be added to the S&P 500 GICS (Global Industry Classification Standard) Oil & Gas Drilling Sub-Industry index.
Following is a summary of the change:
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S&P 500 INDEX – October 28, 2013 |
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COMPANY |
GICS ECONOMIC SECTOR |
GICS SUB-INDUSTRY |
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ADDED |
Transocean |
Energy |
Oil & Gas Drilling |
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DELETED |
Dell |
Information Technology |
Computer Hardware |
Additions to and deletions from S&P Dow Jones Indices do not in any way reflect an opinion on the investment merits of the companies involved.
About S&P Dow Jones Indices
S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, is the world's largest, global resource for index-based concepts, data and research. Home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average™, S&P Dow Jones Indices LLC has over 115 years of experience constructing innovative and transparent solutions that fulfill the needs of investors. More assets are invested in products based upon our indices than any other provider in the world. With over 830,000 indices covering a wide range of asset classes across the globe, S&P Dow Jones Indices LLC defines the way investors measure and trade the markets. To learn more about our company, please visit www.spdji.com.
.PIRA Energy Group, a NYC-based energy markets consulting firm, reports that the U.S. is the world's largest producer of oil in 2013, according to data 
presented at PIRA's recent Retainer Client Seminarheld in New York City on October 10th and 11th.
U.S. total supply for 2013 is expected to average 12.1 MMB/D. In 2012 the U.S. overtook Russia to become the second largest supplier of oil and was just behind Saudi Arabia. Both the U.S. and Saudi Arabia increased their supply in 2013, though production in the U.S. grew at a faster pace. U.S. total supply in 2013 is larger than that of Saudi Arabia by 0.3 MMB/D and ahead of Russia by 1.6 MMB/D. The fourth through 10th largest suppliers are: China, Canada, UAE, Iran, Iraq, Kuwait, and Mexico.
Total oil supply counts all forms of liquids supply. The largest part is crude oil, including condensates. In this category, the U.S. is expected to produce 7.4 MMB/D, which is less than that produced in Saudi Arabia and Russia by roughly 3 MMB/D each. But the U.S. has substantial other forms of supply, including natural gas liquids (NGLs) at 2.5 MMB/D, biofuels at 1.0 MMB/D, and "refinery gain" at almost 1.3 MMB/D. (Refinery gain measures the ability of a refinery to optimize its output through sophisticated high conversion capabilities.)
The U.S. has surged to be the world's lead oil supplier because of growth in shale oil. Shale crude and condensate production at 2.5 MMB/D in 2013 is now slightly over one-third of total U.S. crude production, and shale NGL at 1.2 MMB/D is almost half of total NGLs. Shale crude is seen growing by 0.8 MMB/D this year, while shale NGL grows 0.3 MMB/D versus 2012. The U.S. shale liquids growth of 3.2 MMB/D over the last four years has been nearly unparalleled in the history of world oil; only Saudi Arabia in 1970-74 raised its production faster.
U.S. total supply growth in 2013 is seen at 1.0 MMB/D and about the same as last year's growth. Its growth rate is greater than the sum of the growth of the next nine fastest growing countries combined and has covered most of the world's net demand growth over the past two years.
The U.S. position as the largest oil supplier in the world looks to be secure for many years. Although growth rates of U.S. shale liquids are expected to become smaller in the future, PIRA's forecast sees the U.S. increasing the lead over the next two largest countries until after 2020 and retaining the lead to at least through 2030.
For more information click here for additional informationon PIRA’s global energy commodity market research services.
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