Wednesday, February 10, 2016

5 Must-See Charts and Stories on Oil

1. The Coming Wave of Oil Refugees
These countries are not only dependent on oil exports; they also rely heavily on imports. As revenues dry up and exchange rates plunge, the cost of living will skyrocket, exacerbating social and political tensions. Europe is already struggling to accommodate refugees from the Middle East and Afghanistan. Nigeria, Egypt, Angola, and Kenya are among Africa’s most populated countries. Imagine what would happen if they imploded and their disenfranchised, angry, and impoverished residents all started moving north.

2. Oil futures tally a 4-session loss of more than 13%
The U.S. Energy Information Administration cut its 2016 forecasts for West Texas Intermediate and Brent crude prices in a monthly report issued Tuesday. For 2017, the EIA raised its outlook for WTI to $50 from $47, while leaving the Brent forecast at $50. The government agency also reduced its 2016 U.S. oil output forecast to 8.69 million barrels from 8.73 million barrels.

In a separate report Monday, the EIA forecast oil output from major U.S. shale plays to fall by 92,000 barrels a day in March from February.

Nonetheless, increases in U.S. oil inventories, which have now topped 500 million barrels for the first time since 1930, will continue and may peak this year at 517 million barrels in April.

With a “relatively conservative” OPEC supply forecast of 32.7 million barrels a day throughout 2016, the net oversupply averages a “huge” 2 million barrels a day in the first quarter and 1.5 million barrels a day in the second quarter, before easing to 0.3 million barrels a day in second half of the year

3. Cheap oil may trigger a new era of OPEC dominance, warns IEA
According to the IEA, OPEC production could jump back above 50% of global output by the 2030s if the sluggish oil-price environment allows the cartel to pursue its strategy of grabbing more market share.
Sean's note: A five-year price war in oil? Ay-yi-yi!

4. Projection on Shale Spending Growth and Production
Here is a chart from @RystadEnergy showing spending growth post-2016. What's amazing is how little output is seen falling.

5. This is how the oil rout’s ‘endgame’ might play out
Minerd argues that world oil supply and demand should start to balance this year as prices inch closer to the cash cost of production and oil producers defer large amounts of planned investments.

“The global oil surplus of approximately 1.6 million barrels per day in 2015 is likely to evaporate slowly during the course of this year. Global demand growth should absorb 1.2 million barrels while output declines from exhausted fracked wells in the U.S. and other non-OPEC countries should reduce output by about 400,000 barrels in 2016,” Minerd wrote.

He grants that those moves could be offset by increased Iranian production, but expects world demand growth, supported by cheaper prices, to erode much of the surplus and help bring the market into balance by the end of the year (see chart below).

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