IEA says oil price 'tide will turn'
The IEA said today that while an oil price recovery may not be "imminent" the "signs are mounting that the tide will turn". "Opec's embrace of market forces last November is a game changer", it added.
In its first Oil Market Report (OMR) of 2015, the OECD's energy watchdog does not change its lacklustre outlook for demand growth but is far more bullish than Opec was yesterday in its monthly report on the impact of the price fall on non-Opec production.
The report says that the sell-off has reduced its expectations of 2015 non-Opec supply growth by 350,000 b/d to 950,000 b/d. Yesterday, Opec cut its forecast by just 80,000 b/d to 1.28mn b/d. The IEA sees Colombia's growth trimmed by 175,000 b/d, and Russia's by 30,000 b/d. Canada's growth will be cut by 95,000 b/d and US light tight oil by 80,000 b/d.
The IEA all but holds its 2015 demand growth forecast at 900,000 b/d, against just 600,000 b/d for 2014, putting 2015 demand at 93.3mn b/d.
But the change in the non-Opec production outlook means that the IEA lifts its forecast for call on Opec crude.
By the end of this year, the call is assessed at 29.8mn b/d. With Opec having held its agreed production target at 30mn b/d when it met in late November, the IEA numbers will be taken as evidence that the plan pushed by Saudi Arabia and its allies to allow prices to fall in order to squeeze non-Opec production is working. But with stocks still building rapidly, it will be the second half of the year before rebalancing occurs.
For the whole of 2015, the IEA now puts call on Opec crude at 29.2mn b/d, reversing a cut it made in its December OMR, and higher than Opec's own trimmed forecast yesterday of 28.8mn b/d.
In the commentary to its report, the IEA said: "How low the market's floor will be is anybody's guess." The fall in production growth for US light tight oil is currently limited by hedging programmes, it added.
The demand response to low prices is proving elusive, the OMR said. Weak underlying economics are a major limiting factor to which are added weak consumer country currencies, subsidy cuts, tax hikes and deflationary concerns in some countries.
ts/et
Send comments to feedback@argusmedia.com
Request more information about Argus' energy and commodity news, data and analysis services.
Copyright © 2015 Argus Media Ltd - www.argusmedia.com - All rights reserved.
Related news posts
Vancouver Aframax rates at 6-month lows ahead of TMX
Vancouver Aframax rates at 6-month lows ahead of TMX
Houston, 23 April (Argus) — An oversupply of Aframax-size crude tankers on the west coast of the Americas in anticipation of the Trans Mountain Expansion (TMX) pressured Vancouver-loading rates to six-month lows on 19 April. With the 590,000 b/d TMX project expected to commence commercial service on 1 May, shipowners have positioned more vessels to be on the west coast to satisfy anticipated demand in Vancouver, but that demand has yet to materialize, leaving the Aframax market oversupplied for now, market participants said. Aframax rates from Vancouver to the US west coast began falling in mid-to-late March as an increase of ballasters added to tonnage in the region, helping drop the rate to ship 80,000t of Cold Lake on that route to $1.50/bl on 19 April from $2.55/bl on 21 March, according to Argus data. The rate held at $1.50/bl on 22 April, the lowest since 2 October and just 3¢/bl higher than the lowest rate since Argus began assessing the route on 21 April 2023. Similarly, the Vancouver-China Aframax rate also fell to a six-month low of $6.59/bl for Cold Lake on 19 April, down from $7.78/bl on 2 April, according to Argus data. In addition to the ballasters, two Aframaxes — the Jag Lokesh and the New Activity — are hauling Argentinian crude to the US west coast and are expected to begin discharging on 3 and 6 May, respectively, according to Vortexa. The Argentinian port of Puerto Rosales is mostly restricted to Panamaxes but can accommodate smaller Aframaxes. Downward pressure from across canal A recent slump in the Gulf of Mexico and Caribbean Aframax market, due in part to falling Mexican crude exports to the US Gulf coast , has exerted additional downward pressure, a shipowner said. "Though markets at each side of the (Panama) Canal are different, softer sentiment looms in the region," the shipowner said. Last week, a charterer hired two Aframaxes for west coast Panama-US west coast voyages, the first at WS102.5 and the second at WS95, equivalent to $12.71/t and $11.78/t, respectively, as multiple shipowners competed for the cargoes. The Vancouver Aframax market typically draws from the same pool of vessels as the west coast Panama market. For example, the Yokosuka Spirit , one of the Aframaxes hired to load in west coast Panama, discharged a Cold Lake cargo in Los Angeles on 21-22 April after loading in Vancouver in mid-March, according to Vortexa and market participants. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US oil and gas deals slowing after record 1Q: Enverus
US oil and gas deals slowing after record 1Q: Enverus
New York, 23 April (Argus) — US oil and gas sector mergers will likely slow for the rest of the year following a record $51bn in deal in the first quarter, according to consultancy Enverus. Transactions slowed in March and the second quarter appears to have already lost momentum, according to Enverus, following the year-end 2023 surge in consolidation that spurred an unprecedented $192bn of upstream deals last year. The Permian shale basin of west Texas and southeastern New Mexico continued to dominate mergers and acquisitions, as companies competed for the remaining high-quality inventory on offer. Acquisitions were led by Diamondback Energy's $26bn takeover of closely-held Endeavor Energy Resources . Others include APA buying Callon Petroleum for $4.5bn in stock and Chesapeake Energy's $7.4bn takeover of Southwestern Energy . The deal cast a spotlight on the remaining private family-owned operators, such as Mewbourne Oil and Fasken Oil & Ranch, which would be highly sought after if they decided to put themselves up for sale. "However, there are no indications these closely held companies are looking to exit any time soon," said Andrew Dittmar, principal analyst at Enverus. "That leaves public explorers and producers (E&P) looking to scoop up the increasingly thin list of private E&Ps backed by institutional capital and built with a sale in mind — or figuring out ways to merge with each other." Deals including ExxonMobil's $59.5bn takeover of Pioneer Natural Resources, as well as Chevron's $53bn deal for Hess, have attracted the attention of anti-trust regulators. The Federal Trade Commission has also sought more information on the Chesapeake/Southwestern deal. "The most likely outcome is all these deals get approved but federal regulatory oversight may pose a headwind to additional consolidation within a single play," said Dittmar. "That may force buyers to broaden their focus by acquiring assets in multiple plays." By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
USGC LNG-VLSFO discount to steady itself
USGC LNG-VLSFO discount to steady itself
New York, 23 April (Argus) — The premium for US Gulf coast (USGC) very low-sulphur fuel oil (VLSFO) to LNG is expected to linger but not widen this spring, maintaining interest in LNG as a bunkering fuel. US Gulf coast LNG prices slipped from a premium to a discount to VLSFO in March 2023 and have remained there since. The discount surpassed 200/t VLSFO-equivalent in January (see chart). Both LNG and VLSFO prices are expected to remain under downward pressure due to high inventories, which could keep the current LNG discount steady. The US winter natural gas withdrawal season ended with 39pc more natural gas in storage compared with the five-year average, according to the US Energy Information Administration (EIA). Henry Hub natural gas monthly average prices dropped below $2/mmBtu in February, for the first time since September 2020, Argus data showed. The EIA expects the US will produce less natural gas on average in the second and third quarter of 2024 compared with the first quarter of 2024. Despite lower production, the US will have the most natural gas in storage on record when the winter withdrawal season begins in November, says the EIA. As a result, the agency forecasts the Henry Hub spot price to average less than $2/mmBtu in the second quarter before "increasing slightly" in the third quarter. EIA's forecast for all of 2024 averages about $2.20/mmBtu. US Gulf coast VLSFO is facing downward price pressure as demand falls and increased refinery activity signals a potential supply build . Rising Gulf coast refinery activity was likely behind some of the drop in prices. Gulf coast refinery utilization last week rose to 91.4pc, the highest in 12 weeks and up by 0.9 percentage points from the prior week. US Gulf coast suppliers are also eyeing strong fuel oil price competition from eastern hemisphere ports such as Singapore and Zhoushan, China, importing cheap Russian residual fuel oil. In general, LNG's substantial discount to VLSFO has kept interest in LNG for bunkering from ship owners with LNG-burning vessels high. The EIA discontinued publishing US bunker sales statistics with the last data available for 2020. But data from the Singapore Maritime & Port Authority, where the LNG–VLSFO discount widened to over $200/t VLSFOe in February, showed Singapore LNG for bunkering demand increase 11.4 times to 75,900t in the first quarter compared with 6,700t in the first quarter of 2023 and 110,900t for full year 2022. By Stefka Wechsler US Gulf coast LNG vs VLSFO $/t VLSFOe Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Kuwait’s KPC agrees VLSFO term supply contract with QE
Kuwait’s KPC agrees VLSFO term supply contract with QE
Singapore, 23 April (Argus) — Kuwait's KPC hassigned a term agreement with fellow state-owned firm Qatar Energy (QE) to supply very-low sulphur fuel oil (VLSFO) for loading over July 2024 through to June 2025. The VLSFO supplied amounts to 1.2mn t/yr (21,000 b/d). KPC finalised the term contract at around a $8-9/t premium against the average of Singapore 0.5pc marine fuel spot assessments, according to a source close to the company. QE has expanded its own bunkering infrastructure at the port of Ras Laffan and started relying on VLSFO supplied from Kuwait's 615,000 b/d al-Zour refinery since early last year. The VLSFO supplied is mainly to meet the country's bunkering and power generation demand. QE had a previous mini term VLSFO agreement with KPC last year. KPC supplied around 1-2 Medium Range size vessels of VLSFO each month from January 2023 to March this year, according to global trade analytics platform Kpler. The announcement of the term deal left the market unfazed, said a Dubai based fuel oil trader, as KPC has regularly offered term tenders over the year. Supplies to QE has been continuing since last year, with the deal merely being a renewal of their previous agreement, the trader added. This is KPC's third official term contract concluded since the start-up of al-Zour in late 2022. The first term contract was awarded for second-half 2023 loading to Shell, with the second to ExxonMobil for first-half 2024 loading. The terms of the two contracts stated a minimum of 80,000 t/month and a maximum of 720,000 t/month of VLSFO, with KPC having discretion over the total volume. Al-Zour can produce around 11mn-12mn t/yr of VLSFO at full capacity, with around half of it allocated for exports. By Asill Bardh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more