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Iraq begins importing Turkish power to cut crude burn

  • Spanish Market: Crude oil, Electricity
  • 22/07/24

Iraq's prime minister Mohammed Shia al-Sudani on Sunday inaugurated a power transmission line connecting the country's northern region with Turkey, one of several steps Baghdad is taking to tackle its gruelling electricty outages and to reduce its dependence on burning crude in its power plants.

The 115km line connects to a power station west of Mosul and will supply 300MW to the northern provinces of Nineveh, Salahuddin and Kirkuk during peak loads. Delayed for two decades, the project is part of Iraq's strategy to connect to neighbouring grids and "integrate into the regional energy system, allowing for diversity and exchange under various peak load conditions", al-Sudani said.

Iraq's electricity minister Ziad Ali Fadel clarified today that the agreement stipulates "Turkey supplies Iraq with 300MW during summer season, while Iraq supplies Turkey with 150MW during the remainder of the year from the surplus of its electricity production".

Iraq sits on massive oil reserves and is Opec's second-largest producer but it remains heavily reliant on electricity and gas imports from neighbouring countries. The US-led military invasion in 2003, the emergence of the Islamic State and record levels of corruption have all contributed to the underdevelopment of vital infrastructure in Iraq. Power outages during the summer have been a source of political turmoil often causing massive protests.

Data provided by Iraq's oil ministry indicate the country burned an average of 120,000 b/d of crude in its power plants in the first half of this year. Figures from the Joint Organisations Data Initiative (Jodi) suggest Iraq's direct crude burn averaged 185,000 b/d in 2023.

Earlier this year, Iraq agreed a five-year gas supply agreement with Iran for up to 50mn m³/d. Baghdad also began benefitting from 40MW of electricity supply from Jordan through a newly-established power line that became operational at the beginning of April. And it aims to "complete the connection with the Gulf Co-operation Council electric grid by the end of this year", al-Sudani said.

Iraq's oil ministry said the plan is to reduce crude burn at its power stations. Baghdad said the measures will also help it to adhere to its Opec+ crude production commitments. Iraq has exceeded its Opec+ output target every month this year, and as the group's least compliant member it agreed in May to make additional cuts to compensate for prior overproduction.


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IEA points to oil stocks in case of supply disruption


15/10/24
15/10/24

IEA points to oil stocks in case of supply disruption

London, 15 October (Argus) — The world can draw on global oil stocks and rely on Opec+ spare production capacity in case of a supply disruption erupting from the conflict between Iran and Israel, the IEA said today. In its latest Oil Market Report , the Paris-based watchdog said it was "ready to act if necessary." It said IEA public stocks alone stood at over 1.2bn bl in addition to 500mn bl held under industry obligations. The IEA also said non-member China held 1.1bn bl of crude stocks, enough to meet 75 days of domestic refinery runs. The IEA co-ordinated two emergency stock releases in 2022 after Russia invaded Ukraine. The world's reliance on stocks would become more pronounced if any supply disruption extended beyond Iran's oil industry to include flows through the Strait of Hormuz. This would threaten most Opec+ spare production capacity of more than 5mn b/d as members such as Saudi Arabia, Iraq, Kuwait and the UAE are highly reliant on the waterway to export their oil. But as long as supply keeps flowing, the IEA said that the market faces a "sizeable surplus" next year. The agency's latest balances show a supply surplus of 1.11mn b/d in 2025, up by 50,000 b/d compared with its estimates last month. For this year, the agency now sees a slight surplus of 90,000 b/d, compared with a slight deficit last month. In the final quarter of this year, the IEA sees a surplus of around 200,000 b/d. Concerns over the strength of oil demand have been rising in recent months, with the IEA once again trimming its oil consumption forecast for this year. The IEA cut its 2024 global oil demand growth forecast by another 40,000 b/d this month to 860,000 b/d, with China once again the main driver. A slowdown in China's economy remains the key drag on oil consumption growth. The IEA sees China's oil demand this year increasing by 150,000 b/d compared with 180,000 b/d in its report last month. At the start of the year the agency was guiding for growth of 710,000 b/d from China. The IEA also downgraded its estimated growth from China for next year to 220,000 b/d from 260,000 b/d last month, despite the country's recently announced stimulus packages. For next year, the agency sees oil demand growth slightly higher at 1mn b/d, up by 40,000 b/d from last month's report. But growth for both 2024 and 2025 is set to remain well below 2023's post-pandemic surge in growth of just under 2mn b/d. On global supply, the IEA kept its growth estimate broadly unchanged at 660,000 b/d. But it expects global growth to be just above 2mn b/d next year even if all Opec+ cuts are maintained. Some members of Opec+ are due to start unwinding 2.2mn b/d of voluntary cuts starting in December — although this is dependent on market conditions. The IEA said that the 500,000 b/d fall in Opec+ crude production in September — led by Libya — could make it easier for the alliance to implement its plan to raise output, although healthy non-Opec+ supply growth next year will remain a concern. The agency said global observed oil stocks declined by 22.3mn bl in August, led by a 16.5mn bl draw on crude. It also said preliminary data showed stocks fell further in September. By Aydin Calik Global oil supply/demand balance mn b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Guyana crudes pressured by end of Libya blockade, TMX


14/10/24
14/10/24

Guyana crudes pressured by end of Libya blockade, TMX

Houston, 14 October (Argus) — The restoration of Libyan crude production and an influx of heavy-sour Canadian grades to the US west coast has pressured light sweet Guyana crudes to their widest differential against Argus North Sea Dated since the assessments launched in February. Values for Guyana crudes Liza, Unity Gold and Payara Gold fell by 20-80¢/bl last week as offer levels fell swiftly. Liza reached a $1.20/bl discount against North Sea Dated, Unity Gold fell to a 35¢/bl discount and Payara Gold a 33¢/bl discount. Liza and Unity Gold fell to their lowest value since Argus began to assess the grades, while Payara Gold fell to its lowest level since mid-March. European refiners had turned toward Guyana after the 26 August start of the Libyan oil blockade , with imports rising by around 200,000 b/d to almost 456,000 b/d in September, according to data analytics firm Vortexa, reflecting the highest flows on that route since March. Libya has since recovered to more than 1mn b/d of production after the country's oil blockade ended on 3 October, according to data from state-owned oil company NOC published last week. Output in September was less than half of pre-blockade levels, with Libya's crude exports down to 460,000 b/d in that month compared with 1.02mn b/d in August, according to Kpler data. Projected October Guyana exports to Europe are 205,000 b/d lower than September at only 193,000 b/d, Vortexa data shows. TMX takeover Guyana prices also could be under pressure from added competition on the Americas Pacific coast from crude exported via the 590,000 b/d Trans Mountain Expansion (TMX) pipeline. In May, before the startup of TMX, Guyanese exports to the US totaled 68,000 b/d, data from Vortexa shows. Refiners did not purchase any Guyanese grades in June and August, and imports in July and September were more than halved from May levels at 32,000 b/d and 29,000 b/d, respectively. Vortexa estimates October deliveries will only amount to less than 29,000 b/d, a 57pc decrease since the start of TMX. TMX has quickly become a valuable crude source to US west coast refiners, displacing many Latin American grades in the process. Ecuadorean crude imports have trended lower since May, and were down by 30pc from June-September compared to a year earlier. Crude volumes arriving at Panama's PTP pipeline from Colombia — a common way US west coast refiners receive Colombian crude — have also trended lower since July. September crude receipts of Colombian grades into Panama have fallen from 173,000 b/d in July to 50,000 b/d in September. By Rachel McGuire and Joao Scheller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Permian producers face new headwinds


14/10/24
14/10/24

Permian producers face new headwinds

London, 14 October (Argus) — Growing associated gas production and rising breakeven prices for new oil wells are creating fresh challenges for Permian producers. Oil output in the Permian basin in Texas and New Mexico is growing more slowly than expected. The EIA revised down forecasts for 2024 Permian production in this month's Short-Term Energy Outlook (STEO) following changes to historical output data. Permian production is now forecast to rise by 6.1pc this year and 3.6pc next, down from 7.8pc and 3.9pc, respectively, a month ago. Activity in the Permian oil and gas sector edged down in the third quarter, firms participating in the Dallas Fed Energy Survey say. Low Waha natural gas trading hub prices prompted about a third of 23 active exploration and production (E&P) firms to curtail production, and another third to either delay and defer drilling or well completions. Permian gas prices were negative — meaning that sellers pay buyers to take gas — for most of the six months before early September, as associated gas production exceeded pipeline capacity to move it to market. But Waha prices turned positive again last month as gas began to flow out of the region along the new Matterhorn Express pipeline. Deliveries on the 2.5bn cf/d (25bn m³/yr) Matterhorn pipeline have averaged about 600mn cf/d this month, Gelber & Associates analysts say. Flows are expected to ramp up to full capacity before the end of 2024, but robust associated gas production in the Permian remains a constant factor. The Permian basin now accounts for around a fifth of US natural gas production and is the fastest-growing source of new supply, as rising oil output adds increasing volumes of associated gas (see graph). The GOR — the average ratio of gas output ('000 cf) to oil production (bl) — in the Permian has increased from around 2 to over 3.5 since 2012, data from analysts Novi Labs show. The GOR for Permian wells typically rises during the life of a well. The GOR for Midland wells trebles from 1 to 3 after five years of production and nearly doubles for Delaware wells from just over 2 to just over 4. So the GOR inevitably rises as the share of legacy wells in overall output grows. Tiers for fears Firms are also using up the better drilling locations. Shale is not a uniform resource. Despite impressive advances in productivity over the past decade, rock quality remains the most important driver of well performance. Operators target high-quality (tier 1) wells first if they can, leaving lower-quality tier 2–4 wells for later, hoping that improvements in drilling and completion technology and efficiency will offset poorer yields. Less than two-fifths of the 25,000 drilling sites estimated to remain in the Midland basin offer a breakeven below $60/bl over a two-year period, according to a new assessment by Novi Labs using detailed rock quality data and incorporating the impact of infill well spacing patterns (see graph). Results reflect huge geologic variation within the basin and yield a weighted-average breakeven of $74/bl for the potential inventory of undrilled Midland wells. "Average tier 1 rock breaks even on average at $60/bl, but that number for tier 4 rises to $96/bl," Novi's Ted Cross says. For comparison, breakeven WTI prices for drilling a new oil well in the Midland basin ranged from $40-85/bl and averaged $62/bl, according to 87 E&P firms surveyed by the Dallas Fed in March (see graph). Over the past five years, average breakeven prices for new Midland oil wells from the Dallas Fed Energy Survey increased by a just over a third from $46/bl. In 2020, Midland breakeven prices ranged from $30-60/bl. Midland basin remaining well locations Permian oil and gas production Breakeven prices for new wells survey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec again lowers oil demand growth forecasts


14/10/24
14/10/24

Opec again lowers oil demand growth forecasts

London, 14 October (Argus) — Opec has cut its global oil demand growth forecasts for 2024 and 2025 for a third month in a row, bringing its projections slightly closer to other outlooks that have long seen much lower consumption. In its latest Monthly Oil Market Repor t (MOMR) the producer group revised down its 2024 demand growth projection by 110,000 b/d to 1.93mn b/d, driven by China and the Middle East. This is 320,000 b/d lower than the 2.25mn b/d growth Opec had been forecasting until it made its first downward revision for 2024 in August. The biggest reason for the latest downgrade was China, where Opec now sees demand growing by 580,000 b/d in 2024 compared with 650,000 b/d in its previous report. But Opec's demand growth forecasts remain bullish when compared with other outlooks. The IEA projects oil demand will increase by 900,000 b/d in 2024, while the EIA sees growth of 920,000 b/d. The story is similar for 2025. While Opec today lowered its oil demand growth forecast by 100,000 b/d to 1.64mn b/d, this is still much higher than the IEA's forecast of 950,000 b/d and the EIA's 1.29mn b/d. Expectations of weaker demand this year dragged on oil prices in recent weeks. Front-month Ice Brent crude futures prices fell to the lowest this year on 10 September at $69.19/bl, although rising tensions in the Middle East have more recently pushed the price closer to $80/bl. On the supply side, the group kept its non-Opec+ liquids growth estimate for 2024 unchanged at 1.23mn b/d. It nudged up its forecast for next year by 10,000 b/d to 1.11mn b/d. Opec+ crude production — including Mexico — fell by 557,000 b/d to 40.104mn b/d in September, according to an average of secondary sources that includes Argus . This is about 2.7mn b/d below Opec's projected call on Opec+ crude for this year, which stands at 42.8mn b/d. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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